What is the difference between "pre-qualified"-
pre-approved"?
If you are "pre-qualified" you have determined, with a loan officer, what price
you can afford based on the down payment, your debts and the amount the
mortgage company will approve for your mortgage. Being "pre-qualified" is only
a determination of your probable credit. If you are "pre-approved", your
credit, employment and funds have been approved by the lender.
What are closing costs?
Closing costs are an accumulation of charges paid to different entities
associated with the buying and selling of real estate. For buyers, they are
usually about 4-6% of the total sales price of a property. Some of the closing
costs you might encounter are: application fees, appraisal fee, county taxes,
credit report, discount points, documentation fee, escrow fees, homeowners'
association fees, load fees, mortgage insurance, origination fees, tax
registration and title insurance premium.
What is a point?
One point is equal to 1% of the new loan amount. Whenever government
regulation, state usury laws and/or competitive practices prohibit the lender
from charging a rate of interest that would make the real estate loan
competitive with other fields of investments, the lender must seek some method
of increasing the yield for the investors. By charging "points", the lender can
bring the real estate loan up to those other investments.
What is earnest money?
When you make an offer, you will need to put up an earnest money deposit as a
sign of good faith that you are seriously interested in buying a home. That
deposit becomes a part of the purchase price and is held in a trust account
until there is full acceptance of the offer. Typically, an earnest money is
3-5% of the offer amount.
Who do real
estate agents work for?
This depends
on how the agency relationship was established. If the seller has listed his or
her property with the agent, then they are the principal/client. The agent
works for the seller in this instance. If the buyer has entered into a buyer
brokerage agreement with the agent, then the agent works for the buyer. The
buyer is the principal/client. Good real estate practice requires that a
listing and a selling agent provide to their respective principals in a real
estate transaction with oral and/or written disclosure of which the agent
represents in the transaction. A pamphlet, which describes agency as written by
the State of Washington is made available and given to the clients. If it's a
buyer, a buyer agency agreement is signed by the buyer; for a seller, a listing
agreement is signed.
How much
will my property sell for?
It really depends on current market conditions.
Your true need to sell will dictate the price you are willing to accept. A
lower price will bring a faster sale. You need to be careful of the "window of
values". Price it too low, in relation to comparable homes for sale, and you
may attract buyers who think it's a fire sale and you will take even less.
Price it too high and you'll never see an offer. The "just make an offer"
thought never seems to work. The buyer will think if they do make what they
deem a reasonable offer, it may offend you.
What is
an appraisal?
An appraisal is the process of formulating,
supporting and communicating an opinion of value. It is usually required when
real property is sold, financed, condemned, taxed, insured, or partitioned.
Remember that an appraisal is an estimate, not a determination of value. The
appraiser does not determine value; parties to the transaction establish value.
An
appraisal may be in the form of a lengthy written report, a completed form, a
simple letter, or even an oral report. Note: When a home is being bought, the
appraiser most always uses a pre-printed format and fills in the necessary data
as required by the lenders. The report is prepared in accordance with the
Uniform Standards of Appraisal Practice. The purchaser will pay for the
appraisal, the lender will order it to be done, and usually the listing agent
will be at the home during the appraisal process. If it's new construction,
often times the builder will also be there.
I need to
insure my home, right?
Correct. In fact, the lender will require
insurance regardless of how big of a down payment you have. A homeowner's
policy is a combined property and liability insurance policy designed for
owners. There are a variety of these packaged policies designed for owners of
single-family dwellings, for tenants and condominium owners. These policies can
also be endorsed for additional coverage, such as inflation guard, an art
collection, flood insurance, etc.
Who does
the negotiation for me?
In the true sense of the word negotiation is the
transaction of business with the aim of reaching a "meeting of the minds" and
final settlement among the parties that are bargaining. In the case of real
estate, it's usually a home, some land, perhaps investment property that's at
stake. The agent who you hired will negotiate in your behalf. It's sometimes
hard for the people to bargain for themselves and at other times personalities
can get in the way. The agent will act as a buffer between the parties, and in
doing so, will soften the back and forth offers given by the principals. This
softening can make all the difference in final completion and total agreement.
Do I need
a bank or mortgage company to buy a home?
The answer is no. If the owner of a property
owns it "free and clear" or has an underlying loan that is assumable (with or
without qualification), you can buy without using an institution's money. The
easiest way is when the property is free and clear. The real estate contract is
a written agreement between the seller and buyer for the purchase of real
property. The purchase price is paid in installments, usually principal and
interest, over the life of the contract with the balance due at maturity. Many
things are negotiable; interest rates, amortization schedule, and cash out time
periods. Remember, there may not be a lender involved (no underlying mortgage)
so care needs to be taken when writing the purchase and sale agreement.
Will my
agent have all the legal papers I need to buy my house?
Your agents real estate company should supply
all the documents necessary for the purchase of the home.
I have a
time schedule. Timing is very important to my family, how can we be
assured everything will go smoothly?
A seasoned agent can help enormously. Getting
everything agreed to up front in the original purchase and sale agreement is
vitally important. No surprises, that's my rule. Especially the move out date
for the seller, and the move in date for the buyer. It can't be the same day.
Sounds nice on paper, but in reality it can be a nightmare. Make sure your
agent has a firm grip on the various areas of timing in the transaction.
Getting the needed repairs done on time, when to order the appraisal, when to
order the home inspection, will water tests be necessary, how about the septic
tank, should it be pumped? These are just some of the timing issues your agent
should know about.
Will I
need a home inspection?
The home inspection is done for the buyers and
is paid for by the buyers. The appraisal is done for the lender, and is also
paid for by the buyers. Home inspections are usually done when the buyer sees
an older home that they want to buy and is unsure of it's current condition.
Home inspections are very thorough indeed. All aspects of the homes integrity
are checked out. Electrical, plumbing, roof, foundation, appliances, pest and
dry rot, gutters, siding, just about anything you can think of is looked at and
gone over. Many homebuyers are starting to get home inspections on new
construction as well. Peace of mind is what it's really all about, and it's
worth every dime.
I've
never owned a home, what is a mortgage?
It is a legal document used to secure
performance of an obligation, a pledge to pay back a loan. In the real estate
transaction, the buyer of the real estate needs or wants to borrow money to pay
the seller the difference between the down payment and the balance of the
purchase price. When the lender loans the money, the buyer-borrower is required
to sign a promissory note for the amount borrowed and execute a mortgage to
secure the debt. The purpose of the mortgage note is to create a personal
liability for payment on the part of the borrower. The purpose of the mortgage
is to create a lien on the mortgaged property.
In
effect, the mortgage states that the lender can look to the property in the
event that the borrower defaults and fails to make payments on the loan. The
lender can start foreclosure proceedings to sell the property and retain that
part of the proceeds from the sale to pay the remaining unpaid balance of the
note.
What is title insurance?
Title insurance protects the named insured against loss because of defects,
liens, encumbrances, adverse claims or other matters not shown or disclosed to
the new owner that attach before date of policy.
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