Real Estate: Frequently Asked Questions

The first step in the home buying process is to obtain pre-approval for a mortgage. Obtaining a lender's pre-approval letter is the first step in moving forward with your house purchase.

The reasons are as follows:
Before you start looking at homes, it's important to know how much you can afford to spend. This will help prevent you from falling in love with a property that is out of your price range and save you time by only considering properties that fit within your budget. (Pre-approvals can also help avoid disappointment later on.)

Secondly, the loan estimate from your lender will demonstrate how much is needed for the down payment and closing costs. You may need more time to save up, or you might have to liquidate other assets or seek mortgage gift funds from relatives. In any case, you will know exactly what is required financially.

Real estate agents and sellers will take you more seriously as a buyer if you are pre-approved for a mortgage.Real estate agents will usually want a pre-approval before showing properties, particularly in the more expensive segment of the market; luxury home sellers will only allow pre-screened (and confirmed) purchasers to look at their residences. By being more selective with who they let into their home, sellers are also deterring criminals that might scope out the house for easy targets (like identifying if there's a security system, finding valuable artwork or other costly personal belongings).

On average, it takes 10-12 weeks to buy a house once you've started searching online. Once an offer has been accepted on a chosen property, the escrow period usually lasts 30-45 days (in normal market conditions). As a result, buyers who pay cash have been reported to buy properties more quickly than those who finance.

The condition of the real estate market, as well as other local market factors, play a role in how quickly properties are sold. Buying a house may take longer in hot markets with a lot of sales activity because many parties become involved in the transaction. For example, if home sales increase rapidly, the demand for property appraisals and home inspections also escalate, yet there will be no additional appraisers and inspectors to do the extra work. Lender turn-around times for loan underwriting can also decelerate. If each party involved in a deal takes slightly longer to get their work done than average, then the entire process gets extended.

In a sellers' market, rising demand for property causes home prices to rise. Here are some of the factors that drive demand:

Before more inventory can be built, economic factors such as a local labor market increase inflow residental traffic and housing prices.

Rates are on the decline, which improves home affordability and attracts more buyer interest, particularly for first-time buyers who can afford larger houses as costs go down.

If interest rates rise rapidly, this may convince buyers who are undecided to make a purchase. They reason that if rates are going up, they need to buy now before they become even less affordable.

When there are fewer homes for sale, buyers will have to compete with each other for a shrinking pool of available options. Because of the lack of new development, there may be a decreased number of houses on the market. Prices for existing properties may rise as a result of the reduced number of units accessible.

A buyer's market is determined by two main factors: decreased demand and lowered prices. Several things may affect a buyer's short-term or long-term demand, such as: A major company in the area closes down and lays off its employees.

The cost of money rises, causing home prices to fall. In a rising rate market, the amount of cash that potential buyers can borrow to purchase a house decreases as the cost of money goes up, lowering overall demand. Better deals are discovered as house values drop to meet demand levels.

Short-term interest rates may provide borrowers with a temporary advantage by allowing them to spend more money before home prices can reflect the recent interest rate adjustments.

If there is a high inventory of homes in your area, it can put downward pressure on prices, especially if the older homes nearby lack desirable features (like modern appliances).

Property values in the area where such events took place can plummet as a result of natural catastrophes, such as an earthquake or flooding.

A stratified market occurs when the supply and demand elements at each price point are distinct and different. For example, home sales for properties above $1.0M may be slow (buyer's market) while homes in the $100k to $350k may be brisk (seller's market).

There are two real estate agents working on most house sales: one that represents the seller and another who represents the buyer.

Listing brokers are real estate professionals who work for sellers and charge a fee to advertise and promote properties. Marketing expenses may include radio spots, magazine advertisements, television and internet advertising. The home will also be included in the local multiple listing service (MLS), allowing other agents in the area (and nationally) to search for and discover it.

Buyer's agents (also known as buyer's agent) are paid by the listing agent for bringing home buyers to the negotiation table. The listing broker and the buyer's agent split the listing fee when the property is sold. Thus, buyers don’t directly pay their agent, but is instead built into the sales price of the property.

In order to qualify for most loans, your FICO score needs to be at 620 or higher. Lenders see those with high credit scores as less of a financial risk, and often this results in a lowered down payment requirement or better interest rate. If a homeowner has a bad credit history, he or she will have to offer more money up-front (or accept a higher interest rate) than someone with excellent credit to offset the lender's risk.

The average down payment in the United States is 11%. However, that number includes first-time and repeat buyers. Let's have a look at things another angle.

The average down payment for all borrowers is 11%, but first-time buyers typically put down 3 to 5% on a property. That's because several first-time home buyer initiatives don't demand large deposits. The FHA loan, which has been around since the 1930s, requires a deposit of only 3.5 percent. Furthermore, some programs allow family members to make down payments by giving a gift.

Some programs - like VA and USDA loans – don’t require any payment down. However, these types of mortgages come with more rules. For example, a VA loan can only be given to a veteran or current service member. A USDA loan is only an option for low-to-middle income buyers who live in specific rural areas that the government has deemed eligible.

Initially if you wanted to take out a conventional loan, 20% down was required upfront. But with the advent of private mortgage insurance (PMI), there are now conventional loan programs that only require 3% down.

If the existing home's accumulated equity is used to pay for the down payment on the new property, it will naturally need to be sold first.

Some people who are buying a new home choose to not sell their old one, but instead turn it into an investment property by renting it out. If that's your plan, you won't have to go through the process of selling your old home. However, the loan company will still need to check things like your credit history and how much of a risk you are in order to decide if they're willing to give you a loan for the new home while also keeping ownership of the old one.

Ultimately, it is up to you which route you prefer! Home shopping today has become increasingly convenient in recent years. With the ability to look up homes online and view pictures before even stepping outside, the process has been completely revolutionized. Nevertheless, there is no experience quite like visiting a home in person to get a sense of its atmosphere.

Agents usually ask buyers for a check as part of their offer on a home (since checks are the same as cash). The deposit is generally 1%-2% of the total purchase price. This earnest money proves to the seller that the buyer’s offer is real and legitimate.

The money is placed in an escrow account with the title company to ensure its safety. If an agreement is reached, the earnest money goes toward the down payment and closing costs. The cash is returned to the buyer if the transaction fails.

If you and the seller agree to the terms of a deal, but then you back out as the buyer, the earnest money may not be refunded. To protect your deposit, ask your agent about offer contingencies.

The seller should ideally respond to written offers within twenty-four hours.

There are three options available to sellers when they receive an initial offer: they can accept it, reject it, or make a counteroffer. If you're the buyer and receive a counteroffer from the seller, don't give up hope; the deal isn't dead until both parties agree that it is. Review the counteroffer with your agent to see if it's something you're willing to accept or make a counteroffer. If the seller accepts, it's a done deal. If you want to accept it right away, feel free. Keep in mind that offers and counteroffers are standard; this isn't unusual, and discussions are a part of what Realtors do as th

Home inspections are strongly advised because they may uncover flaws in a property that may not be readily apparent. Home inspections provide an important sense of security for people who are making one of the most significant financial decisions of their life.

Though it's not a mandatory step, final walk-throughs are highly encouraged for buyers. This gives them an opportunity to make sure that everything is still in order from when they first visited the property. If there were any repairs requested as part of their offer, then doing a follow-up visit helps confirm that those repairs have been made and everything is up to par according to the contract terms.