Table of Contents
What is the first step for buying a home?
Meet with a lender to determine the two most important financial factors:
Your maximum preapproval amount, and your monthly payment cost. These will vary depending on your amount of down payment, interest rate and loan fees, so make sure to discuss options on your type of loan, term length, closing costs, and down payment assistance programs.
When buying a home without using a loan, make sure your assets are liquid (A financial asset that can easily be converted into cash in a short amount of time. Liquid assets include things like cash, money market instruments, and marketable securities). If you have cash in an account, the amount must have been in that account for at least two months. You will need to show proof of adequate funds when submitting a cash offer or have pre-approval letter for a loan.
What type of loan should I get?
A great question for your lender. Your primary factor is the monthly amount, and secondly is the maximum that you are approved for. There may be several loan programs you can take advantage of, so ask which is the best fit for your financial situation.
How much down payment is required?
Conventional loans typically require at least 5% down payment, FHA requires at least 3.5%. There may be an additional charge for PMI (Private Mortgage Insurance) for loans that use less than 20% down. USDA and VA loans require zero down payment and are the strictest in terms of the appraisal inspection.
How much does a buyer’s agent cost?
When an agent represents a buyer, not only do they put the buyer’s interests above everyone else’s, including their own. Buyer’s agents also find homes, request showings, write the offer contract, negotiate repair requests, explain escrow, and deliver the keys after closing. For all this, the buyers themselves pays the agent nothing. Their commission comes from the seller. Some written agreements between a buyer and their realtor include a clause to directly pay a certain out of pocket fee if a particular situation occurs. Please read your paperwork thoroughly before signing. A good buyer’s agent will be happy to explain every line.
How can a real estate agent help me sell a home?
There are three main factors in every home sale: The home’s condition, the home’s price, and the home’s marketing. The owners are responsible for the condition, the realtor is responsible for the advertising, and the price is up to the market. In a hot market, there is a strategy for pricing it lower than current market value: to bring in enough competition to drive the price up with a bidding war. Alternately, by over-pricing, it can sit on the market for longer, creating the perception that something is wrong with the house because it has not sold yet. The sweet spot is to price the home at, or slightly lower than its closest competitors and leave enough wiggle room to accept an offer a tad lower than asking price, to make the sale a win-win for both the seller and the buyer. Have your realtor prepare a CMA (Comparative Market Analysis) to find the range of value a house has in the current market. A good realtor is an expert negotiator who can find a win-win by balancing the asking price with other key terms in the offer; Timeline, Close Date, Loan Type, Down Payment, Earnest Money, Home Warranty, rent back and several other money saving factors can help the seller get more net funds, as well as a satisfactory outcome on the entire experience.
A real estate agent has an in-depth knowledge of the area and how your home compares to others on the market. They’ll have a good idea of how much you can get for your home and ways you can improve its value.
When it’s time to list your home for sale, a good realtor will guide you to make sure your home is looking its best, priced right, marketed correctly, and personally inviting people to attend open house events. The goal is to maximize your offers and sell your home faster. They’ll also take care of all the paperwork, coordinate showings and explain escrow.
Real estate agents aren’t just helpful during the listing process, though. Agents can refer a network of professionals throughout the entire selling journey. You’ll get a list of connections for everyone you need, whether that’s a contractor, clean-up crew, movers, and other professional services you may need.
Should I buy a new home before selling my old one?
In a ‘Seller’s Market’ the sellers of the next home you want to purchase have an advantage. They may receive several offers for their home and will pick the best one for their preferred terms and timeline. If your current sale is planned, but not ready for the market, that will delay the funds you will get from selling, in order to buy the next one. Therefore, it may not be as favorable to try and buy before selling your current home. Getting your home ready and placed on the MLS is a big step forward in the process of selling, so no worries about ‘selling’ too soon, and being stuck having to move out before you can move in to the next one. Timelines are flexible, negotiable, and can easily be timed to close simultaneously, making your sale and purchase smooth and stress free. HomeWise has Bridge Experts, trained and experienced in bridging the gap between the sale and the purchase, ensuring that no home seller will ever become homeless, or stuck in a negative situation.
If you will be purchasing using ‘cash’ and not using a loan, then you do not need to sell your old one first. Keep in mind, when buying a home before selling your current one, you may incur two mortgage payments. You can contact a bridge expert to ensure your timeline from selling your current home to buying the next one will be smooth and seamless. There are several different ways to make sure you are never stuck, homeless or under pressure during the transition.
What is an appraisal?
The lender needs to know how much the home is worth before making a loan. If the borrower defaults (stops paying the mortgage) the bank will re-possess the house and sell it to someone else, to get their original loan money back. If you borrow $500k, and the house is only worth $350k, the bank is risking losing $150k if the borrower defaults on the mortgage loan. So, an inspector from the bank will appraise its value, to make sure the loan fits the property.
Do I need title insurance?
Similar to an appraisal, there is coverage to protect your investment in a home, by preventing anyone else from claiming they have a financial right to partially or fully own your property after you buy it. The State requires title insurance to make sure that this potential conflict by conducting a thorough search on previous sales to ensure that no one else but the buyer will own it outright. If by some chance an issue pops up, the title insurance will cover the fees to sort it out.
How high must my credit score be?
Credit scores run between 300 and 850. Most people score between 550 and 750. The higher your score, the less risky you are to a lender. Most loans will only accept a 620 or higher, and the higher your score, the better interest rate you can qualify for. Several factors shape your credit score: a longer history of on-time payments, average length of time you have used credit, late payments, and bankruptcy or defaulting on a loan. There are slightly different interest rates at the levels of 620, 680, 720. It is best to speak with a lender who can run some numbers for your particular situation to determine the best loan fit for your current credit score. HomeWise Real Estate has a list of great lenders, or you can pick your own to find out more.
Why is my home’s appraised value different from the sale price?
Sometimes a home will appraise for lower than the agreed sale price. The bank sends an appraiser to ensure the loan is protected. In a market where buyers are offering wildly over asking price, sometimes the market value is higher than the appraised value. The lender will not risk letting a buyer purchase a home that is worth less than the amount of the loan. If the appraisal is lower than the sale price, the buyer has options. The seller may be disappointed, but the appraiser does a thorough, in-depth analysis. They consider the comparable prices in the current market, area, home condition & style. The appraisal can be disputed, or the buyer can back out of the deal and get their earnest money back. A stronger offer can include a clause that states the buyer is willing to pay a certain amount higher than a potentially low appraisal. Sellers should be aware of this consideration before accepting a high offer price that may be unrealistic to appraise at.
How long will it take to sell my home?
Most transactions take between 4-6 weeks to close from offer acceptance to closing day. A cash transaction can close between two to three weeks. Several factors may delay a closing, but each case is unique. A good seller’s agent will explain the terms in an offer contract, and give a general timeline based on the type of loan, availability of contractors that may be needed to do needed repairs, any contingencies, etc.
Do I need a home inspection?
There is no legal requirement to hire an inspector, however, it is strongly recommended. There is no way to know if there are rodents in a crawlspace, mold in an attic, beams that might be compromised or if the electrical panel is up to code, unless a professional inspects them. Sometimes a buyer will waive the inspection to eliminate that contingency and speed up the sale, but conduct an inspection on their own, just for their own knowledge. If the home inspection calls out an issue, then another professional contractor may be needed to conduct a specialized inspection.
How can I save money when selling a home?
Sellers usually pay 6% in fees, with 3% going to the seller agent and 3% going to the buyer agent.
You can save money by trying to sell your home on your own to eliminate the seller commission. There are still costs, such as title fee, and some seller closing costs.
Keep in mind that selling a home involves a lot of complicated legal paperwork. An agent knows how to handle all of this, so you don’t land in legal trouble.
One alternative is hiring a lawyer to take care of paperwork. However, they don’t come cheap (budget about $1,000-1,500 for the service), and you’d still need to manage your listing and coordinate showings and handle negotiations.
Selling a home requires marketing know-how. Agents regularly deal with the hassles of advertising, preparing the property, and showing your home to potential buyers, ensuring they are all pre-qualified. Licensed realtors have access to the multiple listing service (MLS), a local database of homes for sale. This allows them to list your home on all of the other major listing sites as well.
If you’re selling your home on your own, you have the option to use a flat-fee MLS company to get a sign in your yard and put your listing on Zillow. If you would like, HomeWise will give you a list of all the free sites you can enter your listing on. No obligation, free of charge.
Keep in mind – real estate agents provide great value, earning you more than their fee in most cases (NAR 2021 reports show an average of 14% higher sale price by using a realtor, while the average realtor fees are 6%). The HomeWise Real Estate team massively markets your house to attract more pre-qualified, motivated buyers, using 3 different MLS services, as well as advertise your open house, price the home correctly, and have expertise in negotiations to make your closing more profitable and less stressful. We can even list your home for sale as ‘Coming Soon.’ This helps build anticipation and potentially bring a bidding war, which drives the price higher and puts more in your pocket.
If you have any other topics that you would like answers to, reach out and suggest any to add to this list. Answers will be posted within two days.
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