24 Best First-Time Homebuyer Questions to Ask

Buying a home is often a major milestone. Aside from the pride of homeownership, owning a home helps build long-term wealth with each mortgage payment.

If you’re buying a home for the first time, you can benefit greatly from familiarizing yourself with the homebuying process. The more you know, the more likely you are to avoid any major setbacks and should you run into any problems, you will at least have an idea of what to do next.

I’ve answered the top 24 first-time homebuyer questions to help you get your journey off on the right foot.

24 first-time homebuyer questions answered

You will learn a lot during the process of buying your first home. These answers, including how to get a loan, will give you an understanding of what’s to come as you search for, purchase, and move into your new home.

1. Am I ready to buy a house?

This is the first and most important first-time homebuyer question you should ask yourself. Buying a home is a big responsibility and could be the largest investment you make in your lifetime.

Here are the questions I asked myself:

• Do I have a good credit score?
• Have I saved enough money for a down payment?
• Do I have a stable income?

If you answer yes to the above questions, you could be ready to buy a house. Just remember, all expenses and responsibilities including home maintenance and repairs fall on your shoulders, so be sure you’re ready. I suggest having at least 1% of the home’s value tucked away in savings to cover any unexpected repairs or regular maintenance.

2. What is a mortgage and how does it work?

A mortgage is essentially a secured loan used to buy a home. You agree to make your monthly payments and give the lender the right to repossess your home if you don’t repay as promised. When you borrow a mortgage, you typically make a down payment, which is your investment in the property and then borrow the rest.

You can borrow a mortgage for ten to thirty years and will pay back principal (a portion of the amount borrowed) and interest (the fee the lender charges to lend you the funds).

3. What’s a first-time homebuyer loan?

Grants and loan programs for eligible first-time homebuyers are available at the local and national levels throughout the U.S. These programs make it easier for people to become homeowners through smaller required down payments, lower closing costs, and easier credit qualifying.

Here are a few popular programs for first-time buyers:

• FHA loans: FHA loans are offered by private lenders but insured by the FHA, which allows lenders to give you a better deal. This can mean a lower credit score requirement, lower closing costs, and a down payment as low as 3.5% of the purchase price, instead of the 20% required with many conventional loans.
• VA loans: The Veterans Affairs home loan program for service members and veterans is similar to an FHA loan, but it is guaranteed by the VA. This helps eligible service members and veterans purchase a home with more competitive rates, no down payment, and no private mortgage insurance.
• USDA loans: These loans are guaranteed by the USDA and reserved for low-income families who make less than the median household income for the area. These loans are reserved for borrowers in rural areas and do not require a down payment.
• Conventional loans: First-time homebuyers can borrow a conventional loan if they have great credit and money to put down on the home.

4. How long does it take to get a mortgage?

The entire mortgage process — from pre-approval to getting the actual loan can take between three to six weeks to complete when the market is stable. During peak months when the mortgage lenders receive a higher volume of applications, the mortgage process can take longer.

How long it takes depends on many factors including:

• If the house has a clear title (no liens)
• If the appraiser determines the house’s value is equal to the sales price
• How quickly you provide supporting documentation
• Whether the lender has any questions or concerns about your financial situation

5. Can you buy a house with no money down?

The amount of your down payment will depend on the type of loan you choose and the lender’s specific requirements. Like credit scores, lenders can have different requirements on top of what the program minimums require. The only loans that allow no down payment are VA and USDA loans, and those are only for specific groups. Here are the basics for required down payments:

• FHA loans: 3.5% down payment
• VA loans: 0% down payment
• USDA loans: 0% down payment
• Conventional loans: 3% down payment

Borrowers who choose a conventional loan and are unable to make a down payment of at least 20% of the home’s purchase price may be required to purchase private mortgage insurance (PMI). I suggest if you don’t have 20% to put down on a home that you explore FHA loans as an option to compare the monthly payments and the loan’s total cost.

6. What is private mortgage insurance (PMI)?

Private mortgage insurance is a type of insurance you may be required to purchase if you have a conventional mortgage. Buyers who make a down payment less than 20% of the home’s purchase price are typically required to purchase PMI. PMI is meant to protect the lender, and helps them alleviate some of the risk if you stop making payments on your loan.

PMI is arranged by the lender and is provided by a private insurance company. Most borrowers pay PMI premiums monthly, but you may have the option to pay it in one lump sum at closing or a combination of the two.

The good news is that you may be eligible to cancel PMI when you pay your mortgage balance down to less than 80% of the home’s value. You may have to request cancellation from your lender and go through an approval process to make it happen, though.

7. Fixed-rate vs. adjustable-rate mortgage: what’s the difference?

Mortgage lenders offer mortgages with either fixed-rate or adjustable-rate terms.

Fixed-rate mortgage

As the name suggests, the interest rate on a fixed-rate mortgage stays the same — or fixed — for the duration of the loan. This allows you to lock in an interest rate that won’t increase if the market rates increase. But it also means your interest rate won’t decrease if the market rates drop.

The most common terms for a fixed-rate mortgage are 15-year and 30-year mortgages, but shorter and longer terms are available.

Adjustable-rate mortgage

With an adjustable-rate mortgage, the interest rate can change according to the market rates. This means your monthly payment can change.

The loan starts with a fixed rate for a predetermined period of time — which could be months, one year, or a few years — and then adjusts each year after that. The adjusted rate depends on the market rates and what is outlined in the mortgage agreement.

If you’re considering an adjustable rate mortgage, make sure you know the worst case scenario for the payment to ensure you can afford it if the market goes that direction.

8. How do I get the best mortgage rates?

There are a few key steps to take to get the best mortgage rates.

1. Improve your credit score: Do what you can to have a credit score of 700 or higher. If that’s not possible, maximize your credit score as much as possible to lower your risk of default. This allows lenders to give you a better interest rate.
2. Keep your debts down: Don’t carry too much debt so your debt-to-income ratio is low and shows lenders that you can afford a mortgage.
3. Have stable income: The more stable your income is, the less likely you are to default on the loan, allowing lenders to give you lower interest rates.

I also suggest getting quotes from at least three different lenders. This allows you to compare your options and see which is the most affordable and suitable for your situation.

9. What do I need to qualify for a mortgage loan?

When you’re ready to apply for a mortgage, a lender will require certain information and documentation to determine whether you qualify for a loan.

The exact information required may vary from one lender to another. But according to the Department of Housing and Urban Development, you should have the following information and documentation when you visit with your lender:

• Social Security numbers for those applying for the loan
• Six months’ worth of checking and savings account statements
• Evidence of any other assets, such as stocks and bonds
• A recent pay stub for each applicant detailing your earnings
• A list of all credit card accounts and how much you owe each month
• A list of all accounts and balances due on outstanding loans, such as car loans
• Copies of income statements for the last two years
• The name and address of someone who can verify your employment

10. What credit score will I need to get a mortgage loan?

The minimum credit score you will need in order to get a mortgage loan depends on the lender, the type of loan, and the state in which you’re purchasing the home. Each loan program has its minimum requirements, but lenders can also require higher credit scores if they feel there is too much of a risk. Overall, mortgage programs require the following minimum credit scores:

• FHA: 580 (with a 3.5% down payment) or 500 (with a 10% down payment)
• VA: Typically 620, even though the VA doesn’t require a specific score
• Conventional: Typically 620

In general, the higher your credit score, the higher your chances of approval and the better the rates you will receive. Those with credit scores in the mid- to higher-700s will see the best rates.

11. What’s a debt-to-income ratio?

Your debt-to-income ratio measures how much of your monthly gross income goes toward repaying your debts. This percentage is one way lenders judge your ability to repay the mortgage loan. To calculate your debt-to-income ratio, divide your total monthly debt payments by your gross monthly income.

For example, say you have a mortgage payment of $1,300 a month, a $200 car payment, and you pay another $300 a month toward credit card debt. Your monthly debt payments are $1,800.

$1,300 + $200 + $300 = $1,800

If your gross monthly income is $5,000, then your debt-to-income ratio is 36%.

$1,800 ÷ $5,000 = 36%

Every lender and mortgage program allows different debt-to-income ratios, but the maximum is usually 43%. I’d highly recommend keeping your DTI as low as possible as a first-time homebuyer to ensure you can comfortably afford homeownership.

12. How do I choose a mortgage lender?

To get the best financing deal, it’s important to shop around and compare lenders. There are several different types of lenders, and different lenders will quote you different prices. Shopping around and negotiating with more than one can help you get the best price on your mortgage.

I suggest getting quotes from banks (such as your local bank), direct lenders (you can find them online) and mortgage brokers. This allows you to compare your options. When choosing a mortgage lender, don’t focus only on the mortgage interest rate itself. Instead, look at the big picture, comparing the customer service, benefits offered, and speed of approval.

13. What are mortgage points?

Mortgage points, also known as discount points, let you make a tradeoff to lower the interest rate on your mortgage. In exchange for paying an upfront fee, your interest rate — and thus your monthly payment — is reduced. Points are paid at closing and increase your closing cost.

Each point equals 1% of the loan amount. For example, one point on a $200,000 loan is 1% of the loan, or $2,000. Points aren’t always round numbers either. You can pay 1.25 points, 0.5 points, or even 0.125 points.

If you want to lower your interest rate, ask lenders how many points it would cost to buy the rate down. Compare the monthly savings to the total cost of buying the loan down to ensure it’s worth it.

For example, if it cost you $5,000 to save $15 a month, it wouldn’t be worth it. But if you only had to pay $1,500 to lower your payment by $100, you might consider it as it would only take 15 months of savings to recoup the $1,500.

14. How do I save for a down payment?

The earlier you start saving for a home, the better. Many lenders require down payments, especially on conventional mortgages. If you want to avoid PMI, you’ll need as much as 20% down, which is $20,000 for every $100,000 you borrow.

The key to saving money is to create a budget and make saving a line item, like a non-negotiable bill. This ensures you’ll save the necessary funds and will achieve your dreams of homeownership faster.

Depending on how far into the future you plan to buy, you’ll need to decide where to save money for your house. A high-yield savings account or certificate of deposit (CD) might be worth considering if you plan to buy within the next five years.

15. What are closing costs and how expensive are they?

The down payment is just a part of the funds you’ll need to buy your house. You’ll also pay closing costs, which are fees and charges associated with purchasing a home. They can include:

• Appraisal fees
• Title insurance
• Government taxes
• Lender fees
• Prepaid costs, such as property taxes and homeowners insurance

Buyers typically pay the majority of closing costs. However, buyers and sellers can come to an agreement where the seller assumes some of the closing costs. Who pays what at closing also depends on state law.

16. Should I get a mortgage pre-approval?

A mortgage pre-approval is a letter from a lender that says it is willing to lend to you. A mortgage pre-approval letter means an underwriter reviewed your finances — income, debt, and credit history — and determined how much money you can borrow, what your monthly payments could be, and what your interest would be.

Although not a guarantee that you’ll get a loan, this letter is important when it comes to making an offer on a home, as it shows sellers you will be able to get financing to buy the property. In my experience, many sellers won’t even show you the house unless you have a pre-approval letter.

17. What is a buyer’s agent?

A buyer’s agent is a realtor who is legally bound to help the homebuyer in a real estate transaction. A realtor with a fiduciary duty to help the home seller is known as a listing agent.

Buyer’s agents assist in the home buying process in a number of ways, from finding the right property to negotiating the offer to putting you in contact with other professionals, such as real estate attorneys, home inspectors, and even movers.

In short, a buyer’s agent is meant to help you navigate your way to homeownership.

18. Do real estate agents charge fees?

Most real estate agents earn a commission on the real estate deal. This is usually a percentage of the sales price of the home. Although the exact percentage varies, a typical fee is 5% to 6% of the final sale price of the home.

For example, on a home that sells for $200,000, the real estate commission would be $10,000.

If you’re buying a home, you typically don’t have to pay real estate agent commission. Generally, the seller pays the full commission for both the services of their listing agent and the buyer’s agent.

19. Who should pay for a home inspection?

As the buyer, you pay for the inspection of a potential home yourself. An inspector accountable only to you will help ensure you’re getting a complete inspection and an honest opinion of the physical condition of the property.

Ask friends or family members if they have an inspector they can recommend. If you look online, check reviews and only choose an inspector you believe will give you an honest assessment. You may be able to negotiate with the seller or cancel the sale entirely if your home inspector finds that the property needs costly repairs.

20. Can a seller refuse to make repairs?

Depending on the repairs and the terms of the purchase contract, a seller may or may not agree to pay for repairs. Common repairs required after a home inspection are things such as foundation and structural defects, building code violations, and other safety issues. If an inspector finds such issues, the seller will likely be responsible for making the necessary repairs. In that case, the seller can either fix these problems or give the buyer a credit so they can pay for the repairs themselves.

According to the CFPB, “If your purchase contract is contingent on a satisfactory inspection, you have the right to cancel the sale without penalty if you are not satisfied with the results of the inspection.”

21. What happens at a real estate closing?

The closing process, or settlement, is the final step in buying a home. Closing is when you and all other parties in the mortgage loan transaction — real estate agents, attorneys, your title insurance company — sign the necessary documents to close the deal. At that time, you become legally responsible for the mortgage loan.

I highly recommend that you have your own real estate attorney who can review the documents and help you understand them. Take the time to read each document carefully and understand what you are signing. A closing agent will go over the documents with you, but taking the time to read them yourself provides the most protection.

22. How soon can I move in after I buy a house?

How fast you can take possession of the house depends on the terms of the sale. For example, when I sold my house, I needed an extra week because my new house wasn’t ready to move into yet. I worked it out with the buyers to pay them rent for the week following the closing so I could remain in my old house until my new home was ready.

23. What should I do after I move in?

The closing is the first step in homeownership; there’s still a lot more to do. Most importantly, you want to secure your home. This means changing all the locks and passcodes on security systems. You don’t want the previous homeowner to have the ability to enter your home.

Some other things you should do upon moving in include:

• Review the home warranty received by the previous owner, or consider buying a new one to cover your home’s major systems or appliances
• Connect the utilities, such as water, gas, and electricity
• Locate your circuit box and emergency shut-offs
• Do a thorough cleaning
• Check smoke and carbon monoxide detectors to make sure they're functioning properly
• Make a maintenance to-do list
• Repaint to make your house your home

24. Should I buy life insurance when I get a mortgage?

This is also one of the most important first-time homebuyer questions since your home is likely one of your largest assets, and it’s also probably your largest financial responsibility. If you have a family and want to ensure they can remain in your home in the event of your death, consider the different types of life insurance. Typically, term life coverage is the most affordable option and is sufficient for most people, especially first-time homebuyers.

Life insurance companies offer multiple policy terms, typically ranging from 5 to 20 (or even 30) years. If you purchase term life coverage for at least the amount of your mortgage, your family can pay off the mortgage with the proceeds of your life insurance policy should you pass away during the policy’s term. If they don’t want to pay off the mortgage, your family will at least have the money to be able to continue living in your home. This can give you some much-needed peace of mind when you buy your first home.

Bottom line

Buying a home is a major milestone for many people. As exciting as it is, the home buying process can feel complicated to navigate. There are so many first-time homebuyer questions in which you need support from an expert, such as a knowledgeable real estate agent, real estate attorney, and closing agent who will walk you through the process and ensure you understand the terms and conditions of buying a home.