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  • Writer's pictureRebecca Richardson - Mortgage Consultant

Homebuying AMA

I get plenty of questions from both first-time homebuyers and experienced homebuyers alike. Here are a few questions that I’m frequently asked, along with the answers I find most helpful!

Can I include finance closing costs in my loan when buying a home?

No...and yes! Buyers pay on average 2-5% of the sales price in closing costs, and in most cases, these fees cannot be financed into the loan. However, there are two ways that you can avoid paying them out of pocket:

  1. Ask the seller to pay your closing costs. This may mean that you pay a slightly higher sales price (so that the seller doesn’t lose money by paying them), but it usually has a minimum impact on your payment.

  2. Opt for a higher rate. In this scenario, the lender covers closing costs in exchange for a higher rate. While this results in higher monthly payments and more interest over time, it can be a good option if you don’t have the cash on hand to pay for closing costs upfront.

While you can’t typically roll the closing costs into the loan, talking with a lender before making an offer on a home and understanding your options can go a long way in saving you money when buying a home.

Is the lowest rate the best deal?

The short answer? Not usually. Here's why:

Often, lower rates come with higher closing costs, which can outweigh the potential savings over the life of the loan. When lenders offer a low interest rate, they may offset the reduced interest income by charging higher closing costs. This means that even though you may be paying less in interest over the life of the loan, you could be paying more upfront in closing costs.

Furthermore, most people do not keep their mortgage long enough to justify paying thousands of dollars in closing costs for a slightly lower interest rate. If you’re planning on selling your home or refinancing your mortgage within a few years, it might not make sense to pay extra for a lower interest rate.

Ultimately, the best deal on a mortgage will depend on your individual circumstances and financial goals. It’s important to carefully consider the interest rate, closing costs, and other factors when comparing different mortgage offers.

How long should I stay in my home?

Most first-time buyers wonder how long they need to live in their first home to make buying worth it. If you’re in this position, here’s some good news: your first home doesn’t need to be your forever home!

Experts recommend staying for at least two years to help avoid capital gains taxes and to make a profit when you sell. However, you should ideally stay for 3-5 years, as this will give you a better chance to build equity in your home and make a more significant return on your investment.

Despite these recommendations, most first-time buyers only stay in their starter homes for 2-5 years. According to a recent NAR study, 26% of 22 to 30-year-olds anticipate living in their homes for 4-5 years after purchasing, while 7% expect to stay for only 2-3 years. This means that many people are not taking full advantage of the benefits of homeownership.

It’s not worth stressing about your first home being a forever home. Instead, take advantage of the benefits of homeownership by making a smart investment in your future. To make sure you’re making these smart investments, feel free to reach out to a member of my team!

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