Buyers Frequently Asked Questions (FAQ)
Question: Why do I have to talk to a lender before I start looking?
Answer: There are so many things for a lender to consider prior to giving you a home loan that this should always be the first place you start your search. Your Realtor probably has the names and numbers of a vareity of Lenders in your area. These are usually people the Realtor has had personal experience with and is confident they will do a good job for you. The Lender will evaluate your Credit Score (FICO) and your job tenure and security, as well as your total indebtedness. All these factors together will give the lender a true picture of what you can afford to spend a month on your Principal, Interest, Taxes and Insurance. This number with it's accompanying interest rate and downpayment information will tell the Lender the value the property you should be looking for. Your lender will work with your Realtor to help them understand exactly what you can afford and get the appropriate approvals needed to accompany your Offer to Purchase. A good lender is worth as much as a Realtor and you want to work with a Lender who has a good realtionship with your Realtor. They both have your best interest at heart.
Q. Can I get help from somebody to buy the house, like my parents or grandparents?
A. Yes, but you need to tell your lender and your Realtor this up front. Just like all the other things a lender takes in to consideration this needs to be taken into consideration during your approval process. It is perfectly fine for you to get the money from another source but you must be honest about where you are getting it, when and why. If the money you are getting for your purchase needs to be repaid be sure to tell your lender that as well.
Q. How many times should I visit a house before I decide it's right for me?
A. You'd be amazed some people need to see a home only once! When I purchased my home I knew it was the "one" when I crossed the threshold the first time. It's just a feeling, you know it's right. But I always tell my buyers, even if you love the house and it's exactly what you've been looking for, try to visit the area 2 or 3 times prior to writing the offer, so you can see the neighborhood, in morning rush hour, in evening rush hour, after dark when people are in their houses. A neighborhood changes the way it feels at different times of the day. Check our your new neighborhood and home several times before writing the offer. You'd be surprised what you see on a second or third visit that you didn't in the excitement of the first time there.
Q. What are 'comps' and what do they mean to me?
A. Comps are comparables. Homes in the same area you are looking that have already sold. Appraisers and Realtors are usually looking for property that is very similar within 1 mile of the home you are interested in. Homes that are approximately the same size, with similar room layouts and approximately the same property size are good indications of what a home you are looking at may sell for. For instance 2 identical homes within 1 mile of each other both built in the 60's. One is all original and one has been upgraded with new kitchen, new bathrooms and new landscaping. The upgraded home would sell for more because of the improvements. Realtors have the ability to provide you with comparables to help you make an educated decision about the home you are considering purchasing. This should help you decide how much your offer will be.
Q. Do I have to read all the pages of this contract? There is so much here and it doesn't make sense to me.
A YES YES YES. This is one of the largest transactions of your life. Most people will only buy 2 or 3 homes in their whole life some people will only buy one. This is a huge legal contract and you need to know what you are signing. Your Realtor should be able to explain each paragraph is the contract to you and help you understand the committment you are making. Remember a Realtor is not an attorney. If you have more detailed questions about the contract please contact a real estate attorney. Realtors are trained to understand each paragraph in every piece of paper they ask you to sign. But you should take the responsibility to read and understand the conract yourself.
Q. How negotiable is the price?
A. That could depend on many factors. The asking price and the Selling price are usually within 3 to 5% of each other. But if a Seller is anxious to sell and the Buyer has already received approval from a lender, does not have a Contingency that requires they sell another home, the price may be more negotiable. If a property has been on the market for a long time, the Seller may be getting anxious to sell. Your Realtor will be able to tell you how much homes in the area sell for as a percent of the asking price. They will also be able to tell you the circumstances around the reason for the sale. Perhaps the Seller is being relocated, or perhaps they are moving up the property ladder or down the property ladder. All of these issues will contribute to the reasons that somebody may or may not take a discount on their property. Most Sellers believe their home is priced to sell at the number they have listed it. The one thing you don't want to do is offer a price so low that it is an insult the Seller and jeopardize whether you get the home or not. Often a Seller will refuse to sell because they are insulted.
Q. What are contingencies
A There are a variety of contingencies, these are points at which your contract can be cancelled and you will receive a full refund of your deposit. There is a contingency for your Home Inspection. When the inspection is complete to your satisfaction, you will be asked to remove that contingency from your sale. There is a loan approval contingency. When the lender agrees in writing to provide you with a loan in the amount you want and at the interest rate you want you will be asked to remove the loan contingency. In this economy it is better to leave that contingency in place until the loan is funded. There is an appraisal contingency. This contingency can be removed when the Lender tells you that the appraisal came in at the amount required for your purchase. Sometimes there is a contingency that says you must sell your current home before you buy another home. All contingencies have very specific time lines. Have your Realtor review and explain the time lines to you.
Q. Why do I need a home inspection?
A When you first walk into a house it may appear 'perfect', especially if it's been recently painted and fixed up. Many times there are things in a home we haven't thought of checking out or can't see. Things like what's under the carpet, in the walls,etc. In every home there are obvious things that are broken or don't work, like a leaky faucett, or door knob that has fallen off. But in most homes there are things we can't see. During the initial phase of the contract you have the opportunity to have a 'professional' check out the home. They will test everything that can be tested, check out walls, doors, etc. but more importantly they have a trained eye to spot things that may look fine to you and I but are actually signs of a bigger problem. Cracks in the garage floor may means nothing but they could be an indication of something bigger. During the inspection phase of your contract you have the right to cancel the sale with no penalties. We want to insure you are purchasing a home that is in good condition, or has things wrong with it that you can live with or can have repaired at a reasonable cost. You can also use this list of items created by the Home Inspector to create your "Request for Repair" list. Remember this is a request the Seller does not have to repair items just because you asked. But if something is a real problem and the inspector has called it out on the report, it is in the best interst of the Seller and you as the buyer to have it repaired. You can also use the Inpsectors Report as a guide to future repairs or renovations once you've purchased the home. We like to recommend that you use an ASHI certified home inspectors (American Society of Home Inspectors) Like Realtors these inspectors live by a strict code of ethics. Your Realtor will have a list of Inspectors for you to chose from in your area.
Q. How do I pick the service providers - inspectors, insurance, etc.?
A. Your Realtor should be able to provide you with a list of service providers. Usually these are people that other clients have used and said they are happy about. You should also talk to friends who have purchased homes recently and see who they used and who they liked. Most importantly you need to talk to these people yourself. Ask them questions, how long have you been in business, why would I choose you? If they sound reasonable, their answers are good and you are comfortable with the conversation, and you've had a recommendation from somebody it's a pretty safe bet you'll be happy. Remember you are pay for these services yourself so you want to be sure you get the right person. I have never taken a referral payment from anybody. I don't think I can honestly refer you to anybody, escrow, title, or home inspectors or lenders if they are contributing to my earnings. If your Realtor is going to be fair and unbiased about the services you use they shouldn't be taking money from anybody. Ask your Realtor if they receive any compensation from anybody they have recommended. If they do, find another service provider or another Realtor. You want your Realtor to be abe express their dissatisfaction on your behalf if the provider isn't doing a good job - let your Realtor know how you feel about this.
Q. How much money will I need to close?
A. Your lender and your Realtor will be able to give you a pretty good idea what your actual costs to purchase the home will be. The Realtor can do a Buyers Net Sheet which will provide you with approximate costs to purchase the home. The lender will have some specific fees attached to the cost of the loan. Be sure to ask the lender exactly what the fees will be what what they are for. Don't accept any costs you don't understand. When you open escrow, the Escrow Officer will provide you with a document outlining the approximate costs to close the transaction.
Q. What does it mean when the escrow officer says , close of escrow?
A. There are 2 really important events prior to you taking ownership, after you have completed all the Lender requirements. Escrow will provide you with an amount that must be deposited into Escrow prior to closing. This money is usually required 3 or 4 days prior to the estimated closing date. Your deposit is already in escrow, these addtiional funds along with the loan amount fromthe lender will make the total amount you are paying for your home. Assuming you are bringing in cash and not using the proceeds from another sale. Once escrow has the statements from the Lender regarding the costs, etc. of the loan, and your money, they can then begin the closing process. Close of escrow does not mean you have ownership of the home. This is the point at which the money changes hands. The next step is to record the new title, including the loan details. In most counties this occurs the day after the loan is 'funded'. Funded is when the money changes hands. Then when we receive a call from Escrow, who gets a call from the Title company, saying "your title has been recorded", the Sellers is now off the title and you are on - Congratulations you now own the home!! LET THE PAYMENTS BEGIN.
If you have any questions about the purchasing of a home, we hope you'll feel free to call or write, we'd be happy to answer them for you. Sarah and I sold 55 homes in 2014 - we've got lots of experience to be able to answer the questions you have.