This week’s Q&A column is sponsored and written by Hope Peele of The Peele Group and McEnearney Associates Realtors®, the leading real estate firm in Alexandria. To learn more about this article and relevant Alexandria market news, contact The Peele Group at 703-244-6115 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.
Question: How much money do I need to buy a home?
Answer: I work with a lot of buyers and the #1 concern is — “Will I be able to afford the costs of buying a home?”
My best suggestion is to talk to a lender as soon as you are considering buying a home. They can help you strategize, even if it’s not for a year or more that you plan to buy. They can save you precious time in avoiding looking at homes that will not work for your budget. They can help you fix things on your credit report so that you aren’t surprised at the last minute with issues that can increase your interest rate. They may even surprise you with how easy it could be to buy a home.
Here are some key points to consider when buying a home.
Downpayment
While you will usually need a down payment, the most important thing to know here is that it doesn’t always have to be 20% down. In fact, most of the buyers that I work with are putting much less of a down payment towards the purchase price.
If you are past or present military, you may qualify for a VA loan, which does not require a downpayment at all. Most buyers will need to put something down, though.
For a conventional loan, you will need to put between 5% and 20% down. The lower amounts usually apply to first-time home buyers, and if you can afford the 20% down, it will help you avoid a monthly mortgage insurance fee (PMI). Again, a lender can help you figure out your options.
There are also some First Time Home Buyer Grants. Virginia has a Down Payment Assistance Grant that never needs to be repaid. There are income limits, but last time I checked, the limit for 2 people was $141K and the max home sale price was $750K. Be sure to ask your lender about this. I have some lenders that I can recommend that know about this program. Just ask!
Closing Costs
When purchasing a home with a mortgage, there will always be some closing costs. This tends to be about 2% of the sales price, but every situation is different, and they could be higher, depending on your situation. It depends on the type of loan you are using, plus there are standard costs factored in, such as appraisal, title insurance, attorney’s fees, taxes, and more. It’s best to discuss this with your lender in advance.
Your Realtor can send a specific home to the lender and they can give you an estimate on all costs. They can also send the info to their trusted settlement company for an estimate. However, your lender will need to weigh in as well.
Realtor Costs
You should also find a great realtor early in the process. They can help you start shopping neighborhoods and understand the process of buying a home. They have a fee for their services, and when you sign your buyer representation paperwork with your Realtor, this fee is outlined.
However, the fee is usually not collected until the time you purchase the home. When you make the offer on a home, you can ask the seller to pay the Realtor fees, which can be 2.5% to 3% or you can pay the fees. In my experience, sellers have been willing to pay the buyers agent compensation.
In conclusion, my best advice is to talk with a lender and a realtor very early in the process. They are there to help you and to be sure that you are super happy with your home when you do buy. As you probably already know, lenders and realtors are your advocates for life.
Whenever you need advice on the best updates for your home over the years, or a refinance if the rates get better, and when it’s time to buy again, they want you to reach out to them and refer your friends and family. So, find those relationships early in the process, and trust them to lead you to your next home!
Hope Peele is a licensed real estate agent with McEnearney Associates, Inc. in Alexandria, Virginia. She grew up in Old Town and currently lives in Del Ray. As a partner with The Peele Group, Hope is dedicated to guiding her clients successfully through the many-faceted process of buying or selling a home. Contact Hope at 703-244-6115.
If you would like a question answered in our weekly column or to set up an appointment with one of our associates, please email: [email protected] or call 703-549-9292.
McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria
