HOME buying faqsFrequently Asked Questions About Home Buying
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What is the first thing to do when thinking about buying a house?
The first thing you should do when making the decision to buy a home is to get pre-approved for a mortgage. Having a pre-approval letter from a lender is key in all home buying negotiations.
Why should I get a pre-approval letter from a lender?
There are a few important reasons to get a pre-approval letter:
- It lets you know how much you can borrow. This way you know what houses to view. Sometimes buyers get set on a certain house and then find out they can’t get approved for a mortgage to cover the house, or they set their levels low, thinking they don’t have the purchasing power – which leads to limited choices. If you know your number you have the power and the confidence to know what you can buy.
- You know what down-payment you’ll need, this will give you a time-frame if you have to save up more money, liquidate assets, or seek mortgage “gifts” from family.
- Negotiation power. That pre-approval letter shows sellers that you are “ready and able” to make an offer. If you with your approval letter goes against someone without a letter, with a similar offer, you are the better candidate.
- Pre-Approval is sometimes required to view homes, especially higher-end homes where the seller wants to make sure that they aren’t letting scammers or possible theives onto their properties.
What is earnest money?
When you make an offer on the home you would like to buy, the earnest money is a check that accompanies the offer. It is generally 1% to 2% of the purchase price. This demonstrates that it is a genuine offer. It’s like a deposit or a reserve. The house is yours during the closing process.
Earnest money is kept in a non-interest bearing trust account for safekeeping by the broker and is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.
UNLESS – and as a buyer, you need to keep this in mind if the BUYER backs out of the deal, the money will not be returned. Once you sign an offer, it is a binding contract and Earnest Money is a contract. Talk to your agent about how to protect yourself from situations like this and contingencies.
What is a buyer's market?
A buyer’s market is defined by low home prices and reduced demand. Usually, a buyer’s market happens with economic disruptions, higher interest rates, high inventory, and recent natural disasters.
Examples of what could cause a buyer’s market:
- Economic – A large employer shuts down, laying off a lot of workers in the area
- High Inventory – New subdivisions are being built with lots of inventory, decreasing prices of older homes in the area
- Natural Disaster – Recent natural disaster can severely impact property values in areas which were impacted.
What is a seller's market?
A seller’s market is defined by increased demand for houses, this in turn drives up home prices.
Examples of what can cause a seller’s market:
- Economic – Labor market is doing good, new businesses move in
- Low-Interest Rate – When Interest rates are trending downward it helps with home affordability and first-time home buyer’s ability to purchase.
- Spike in Interest Rates – If rates have been low and there is a spike, buyers that have been putting it off might hurry to make a purchase, increasing demand.
- Low Inventory – Fewer homes on the market mean more competition between buyers
What is a stratified market?
Most buyer’s haven’t even heard the term stratified market. But, basically, it’s a market that isn’t defined by seller’s or buyer’s. It is where homes in one range are selling quickly, defined as a seller’s market, and homes in another price range are selling slowly, making it a buyer’s market.
If I already own a home, should I sell it before I buy a new one?
This depends on your home equity and purchase power. A lot of the time most buyers will have to sell their house. Lenders might not be able to authorize a mortgage if you are still holding one. Not to mention the equity you have built up in your current house, most buyers usually need that money to put a down payment on the new house.
What is the time frame when purchasing a home? How long should it take?
Zillow.com lists the average time as 4 1/2 months for the searching process and then 30 to 45 for closing.
How much will an agent charge me for buying a house?
Our services at GNO Realty for buyers is free in the majority of cases unless there is some form of extenuating circumstances which are negotiated before any type of contract is signed. The fees are usually covered by the seller, who pays the commissions of both the buyer agent and seller agent.
Once I make an offer, how long will it take to know if it was accepted?
You stipulate their response time within the offer, usually it’s 24-hours.
What happens if the seller rejects my offer?
In the majority of cases, unless in a multiple offer environment, an offer that is not accepted is usually accompanied with a counteroffer. If the new terms are accepatable, once you accept it, you have a deal. Sometimes there is more than one counteroffer. If your offer is rejected without a counteroffer than you are not in contract, confer with your realtor about trying again or moving on to another house.
My offer has been accepted! Now what?
- Any earnest money should go to your realtor.
- All your paperwork needs to be handled promptly, papers from your lender etc.
- Set your closing date by choosing a title company and making an appointment. Talk to your realtor for recommendations, or friends and family who might have a good recommendation.
- Set up a home inspection. This isn’t a recommendation, this is a mandatory requirement from most lenders. Plus, it’s good business. You want to know what you’re buying.
- Next is the appraisal. The lender wants to know the house is worth what they are paying.
- Repairs. If things come up in the inspection process, repairs will be done by the seller or the seller will give financial concessions for closing.
- Get Home Insurance
- Change out the utilities
- Do a final walkthrough (you want to make sure nothing happened!)
- Go to closing and get your keys!
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