Q: What’s the difference between a REALTOR® and a real estate agent?
A: A REALTOR® is regulated by the National Association of REALTORS® and subscribes to a strict Code of Ethics, whereas a real estate agent does not. It is recommended that you work with a licensed REALTOR® during your home-buying process to avoid potential problems.
Q: How do I find the right REALTOR® for me?
A: Not all REALTORS® are equal. Make sure you do your research to find the best fit for you: check out their social media pages, look at their website, read what they’ve written on their blog, and check out their Yelp reviews. Your REALTOR® is the most valuable asset you have during the home-buying process. They are there to help you either sell or buy a home.
Q: Why is it important to have a REALTOR®?
A: Hiring a REALTOR® means you are packing many years and thousands of hours of experience on your side (and that strict Code of Ethics we abide by that we talked about earlier). It’s so important to have representation whether you’re buying or selling. Never let the other side of the transaction talk you into “doing it on your own.” A lot of work goes into closing a real estate transaction: communicating with all parties involved (buyers, sellers, agents, lenders, title companies, attorneys, inspectors, appraisers, repairmen, underwriters, etc.), negotiating one of the biggest investments of your life while protecting your best interests, and executing the logistics of closing (move-out, utility transfer, repairs and so much more). To top it off, REALTORS® know everyone! Need a painter? We’ve got you covered. Don’t know how to get that snake out of your crawl space? We do! Need your flower beds prepped for the Spring? No problem! Along with knowing all sorts of vendors, we also know the top agents in the area, so we are able to find homes before they hit the market.
Q: Should I talk with a bank before looking for a home?
A: YES! Buyers that find a REALTOR® before getting pre-approved will be redirected back to a lender before the REALTOR® can start their search. It is important for a buyer to have a discussion with their lender about finances to determine what price point the buyer should be looking in. We always recommend that buyers ask the lender what the MAX is that they can get approved for – not so you can spend all of your money, but so you have a benchmark to use.
Q: How many lenders should I talk to?
A. You should talk to at least 2 lenders so you can compare their Good Faith Estimates and be sure the one you pick is a good fit for your personality. However, be sure not to talk to more than 3 lenders as your credit score can possibly take a hit from that.
Q: How hard is it to get a mortgage? What interest rate are you likely to pay?
A: Borrowers should have no problem getting a mortgage if they have cash on hand for a down payment, a decent credit score and a stable income. The interest rate you get will be based off of your credit score, your debt-to-income ratio and several other factors. Make sure you speak with your lender and ask for an explanation of your rate, loan product and debt-to-income ratio.
Q: What kind of credit score do I need to buy a home?
A: Consumers these days will likely need a credit score of 740 or above to obtain the best interest rates on the market. A 620-660 credit score is typically the minimum score that lenders require to qualify buyers for a home loan. Your credit score has a much larger impact on your interest rate when using a conventional loan versus using an FHA/VA loan.
Q: What should my down payment be?
A: 20% of the purchase price, if possible! If you put down less than that, you will have to pay mortgage insurance (either private or public, depending on the type of loan), which will increase your monthly payment. If you don’t have 20% to put down, there are other loan options available. There are some conventional loans which require as little as 5% down, and FHA loans require 3.5% down. There are even loans out there that require a 0% down payment. These have stricter guidelines and certain criteria that have to be met, but they do exist! Whatever amount you use for your down payment, you will pay that amount in cash on the day you close on your new home.
Q: Should I buy another home without selling my current one first?
A: This really depends on these factors: the local market conditions, your current financial situation and if you are prepared to potentially move twice. Talk to your REALTOR® about how quickly your home might sell by comparing it to similar houses in your market. Ask yourself these questions:
Can I afford two house payments?
Would I feel rushed if I were to sell my home before having a new home to move into?
Do I have a backup plan to reference if things don’t work out as planned?
Q: What other fees should I plan for as a buyer?
A: Once you go under contract, there are certain items that will need to be paid for along the way. Any inspections (general, pool, septic, termite, etc.) you choose to have done on the house will need to be paid for prior to the inspection or at the time of service. General home inspections are based on the age and the size of the house. Typically, these are between $350-$500, and the termite inspection is usually $45. You’ll also need to pay for the appraisal, which is about $450 depending on your lender. Once you get to closing, you need to have your down payment as well as any closing costs with you. Closing costs are fees that are associated with getting a loan. These generally include setting up your escrow account, paying your homeowners insurance premium for the year, prorated taxes and interest, attorney fees, courier fees, bank fees, etc. A good estimate for closing costs is about 2.5% of the purchase price.
Q: How long does the home-buying process take?
A: Well, that depends. Everyone’s journey is different, so there’s really no general answer in terms of the search. However, the typical time it takes to close on a home once you’re under contract is usually 30 to 45 days depending on the type of loan you get. Check out our list of steps to take during the home-buying process to get a better idea of your timeline.
Q: What is a foreclosure?
A: A foreclosure is the process in which a homeowner loses their rights to a property because of failure to pay the mortgage. The lender then has the right to sell the property and use the proceeds to pay off the remaining mortgage. Therefore, when you buy a foreclosure, you are buying the house from a bank, not the owner. There is typically more red tape to cut through when purchasing a foreclosure, so be prepared for a longer “contract to close” period (60 days or longer).
Q: What is an earnest/trust money deposit?
A: It’s common for a potential home-buyer to present a deposit when making an offer on a home. This demonstrates the seriousness of their offer and shows good faith. The money is held in an escrow account – it does not go to the seller. Make sure you look over your contract before signing to make sure you agree with how the earnest money is dispersed in the event of a disagreement. If everything moves along smoothly and you make it to the closing table, your earnest/trust money will go toward your down payment.
Q: How long does the seller have to respond to my offer?
A: The buyer will include an “expiration date” in their offer (typically 1-2 days after the time of submission). The seller must respond by this date, or the offer is null and void.
Q: How much earnest/trust money do I need?
A: On average, you can expect to pay 1% of the total purchase price rounded up to the next thousand. This money will go towards your down payment once you reach closing.
Q: What repairs should I ask for after the inspection?
A: Repair requests will be addressed on a house-by-house basis. The most important thing to know is that EVERY house will have a list of recommended repairs – no house is perfect. You will work together with your REALTOR® to determine the most important items to you. Water in crawl spaces, microbial growth (aka mold), leaks and foundation issues are big ones to focus on.
Q: What happens if it doesn’t appraise?
A: The contract is contingent upon the appraisal. So if you aren’t happy with the appraised value, you have the right to walk away from the contract. However, if you don’t want to cancel the contract, your REALTOR® can negotiate to lower the purchase price, adjust closing costs, split the difference or you can even choose to bring the difference to the closing table in cash (we do this a lot in multiple offer scenarios). The point is, just because it doesn’t appraise doesn’t mean the contract is dead.