First Time Homebuyer FAQs

First Time Homebuyer FAQs

Buying a home for the first time can be overwhelming.  While most first time homebuyers are looking to get the most for their money and make every dollar count, hiring an experienced real estate attorney is well worth the reasonable cost involved.  The buyer’s attorney, along with the real estate broker and mortgage loan originator, is an important member of the team for any first time buyer.

If you are considering buying a home, either for the first time or not, here are some answers to a few of the questions that you may have as you begin your journey:

Why should I buy instead of rent?

A home is an investment.  When you rent, you send your monthly check to your landlord and that money is gone forever.  When you own your own home, you can deduct the cost of your mortgage loan interest from your federal income taxes and usually from your state taxes.  You can also deduct the property taxes you pay to your city or town.  In addition, the value of your property may go up over the years, building up more “equity” (the difference between the value of the property and the amount you owe on it).

How do I know if I’m ready to buy a home?

You can find out by asking yourself a few questions:

1.      Do I have a steady source of income? Have I been employed on a regular basis for the last 2-3 years?  Is my current income reliable?

2.      Do I have a good record of paying my bills?  Do I have few outstanding long-term debts, like car payments?

3.      Do I have money saved for a down payment? Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

What is title insurance and why do I need it?

A title insurance policy protects the policy holder from disputes over ownership of the property and from problems with the title that constitute a “defect.”  All lenders require that the buyer pay for a “Lender’s Policy” to protect the lender’s interest.  However, by itself, the Lender’s Policy does not provide any protection for the buyer and only would come into effect in the event that the lender is prevented from foreclosing on the mortgage due to the discovery of a title defect.  In order for you to be protected as the buyer, you must purchase an “Owner’s Policy”.  This policy protects you against loss for title threats which are undiscovered or unknown at the time of closing and provides for a legal defense in the event of claims against your title pursuant to the terms of the policy.

How much money will I have to come up with to buy a home?

In general, you need to come up with enough money to cover three expenses: the earnest money deposit (varies, but usually between $500 and $2,000), the down payment (depending on the property between 3% and 20% of the purchase price), and the closing costs (usually between 3% and 7% of the purchase price).

In addition to the mortgage payment, what other costs do I need to consider?

Monthly utilities, property taxes, homeowners’ insurance, and maintenance costs are a few of the expenses to be considered.  Additionally, there may be homeowners’ association or condo association dues, depending on the community.

How are “pre-qualification” and “pre-approval” for a loan different?

Pre-qualification is an informal way to see how much you may be able to borrow.  A pre-approval is the lender’s commitment to lend to you, although it is always subject to various conditions.

Should I use a real estate agent/broker?  How do I find a good one?

A good real estate professional can guide you through the entire process and make the experience much easier.  All of the details involved in home buying can be mind-boggling.  Start by asking your family and friends if they can recommend an agent.  Don’t be afraid to shop around, interview agents, and select one who listens well and understands your needs.  Even though many agents represent sellers, either they or another agent in their office can represent you as well, provided there is transparency and full disclosure.

Why do I also need to hire an attorney?

It is also a great idea to have an attorney representing you.  You should hire the attorney BEFORE you sign ANY agreement, including an Offer to Purchase.  Once you have signed, it may be considered a binding contract and you could lose your deposit if you are unable or unwilling to go through with the purchase.  Remember, once you sign an agreement, you cannot later go back and “unsign” if you discover something that is not in your best interest.  Depending on where you are in the process, an experienced real estate attorney can also recommend high quality real estate agents and mortgage lenders that he or she has worked with in the past.

  
When buying a home, either for the first time or not, the more knowledgeable you are about the process, the better prepared you will be to make an informed decision.  Hopefully, with the assistance of experienced professionals, you will soon be on the path to opening the door to your new home.

Andy Schwartz is an attorney with an office in Norwood, Massachusetts, concentrating in real estate law and estate planning.  Andy is a member of the Real Estate Bar Association of Massachusetts and the Norfolk and Plymouth Estate and Business Planning Council.  He has over 20 years of experience representing buyers, sellers, mortgage lenders, and property owners throughout Massachusetts.  If you have any questions or comments, please email him at ahs@andyschwartzlaw.com or call (781) 269-5280.  You can also visit his website, www.AndySchwartzLaw.com.