IItt’ss MOVING SEASON!!! Yeahhh. Buyers, sellers, real estate agents, inspectors, appraisers, loan officers, Title Company agents are ALL excited. But, before you make that move, here are the answers to some frequently asked questions from home buyers.
Q: How much do I have to pay the agent? A: Nothing. As a buyer, you do not pay your agent, the seller does.
Q: Why do I have to sign an agreement? A: The Exclusive Buyer/Tenant Representation agreement is a mandatory document that protects YOU (the buyer) in that it affiliates you with an agent who is legally obligated to protect your interest in the transaction. The agreement also protects the agent who has worked so hard to secure you as a client and has helped you to find the home of your dreams.
Fortunately, all agreements have a way of escape through a mutual end date or a time frame in which you are able to terminate the agreement in writing. Please be aware that even if you sign the “hiring contract” or agreement for one day, a weekend, monthly, or for several months, it is a mandatory document that protects all parties involved.
Q: Why can’t I work with more than one agent?
A: The industry not only works to protect the consumer but it also demands moral ethics of agents. If the buyer or seller signs an agreement to work with a particular agent but has not submitted the termination in writing, no other agent is permitted to work with you.
Understandably, time is of the essence for buyers and sellers so partner with your agent and trust that the agent that you hired to work on your behalf has your best interest in mind or terminate the agreement in writing immediately.
Q: How much will buying a home cost me?
A: The average sales price for a home in Prince George’s County Maryland is $260k. As a rule of thumb, the buyer should save around $7k-$10k which is about 3-5% of the home sales price but also know that the cost of buying a house depends on many factors including interest rates, closing help, and the loan product. Each loan product has different requirements: FHA, 3.5% down; VA, 2-5% down; and 203k (reno), 3.5% down, etc.. Funds are always verified and you should ALWAYS ask the seller for closing help and ask the loan officer and agent about home buying programs.
Q: Am I able to continue looking at homes with my agent after I submit an offer on a house already?
A: Before you put an offer on any property, be absolutely sure that you will be happy living in the home and in the area for at least 30 years because when you submit the offer on a home you are essentially entering into a potential contract agreement. Unless your desire is to purchase two homes, the best thing to do is to wait until the contract is denied and then begin your search again.
Q: How much is it for an appraisal?
A: The price of an appraisal depends on what the company charges but appraiser is sent by the lender and the typical cost of an appraisal can range from $200-$600 depending on the size and the number of units. The amount is an upfront fee that is not deducted at settlement.
Q: How much is it for a home inspection? A: The cost of a home inspection varies from $150-$400+ depending on the square ft. of the home, the type of testing provided and how much the company charges. Shop around. The amount is an upfront fee that is not deducted at settlement.
Q: What if I don’t like the agent that I hired?
A: Communicate in writing (email, text (save), letter). Just remember that if the agent is the procuring cause of you finding the home, the agent is entitled to a commission. But fortunately, every agreement has an expiration date. If you want to terminate you must put it in writing.
Q: How much of an earnest money deposit should I put down?
A: When a buyer falls in love with a home, it can be an emotional roller coaster. The over excitement can cause one to believe that putting down a larger deposit will seal the deal and turn the odds in your favor but that is not necessarily true. A suggested deposit amount of course depends on you but $500-$1500 is sufficient. This amount can be held by the agent’s broker or by the title company. And yes, there are steps that you can take to get the deposit back but be certain that you will be comfortable living in the home for at least 30 years before you make an offer on any property.
Q: What credit score is needed to purchase a home?
A: An ideal credit score to purchase a home is 640 & up. However, I have seen some programs accept a score of 500 but require a larger down payment and of course there are higher interest rates. For the most part, the credit score depends on the loan product.
Q: My husband or significant other has bad credit. Can we get approved for a mortgage?
A: No. The lender won’t consider the score that won’t qualify. However, if you have great income and an acceptable score, you can apply for the loan alone and still add your spouse or significant other to the deed using an addendum provided by the agent.
Q: Where can I get a loan?
A: A buyer can get financing from several sources including banks, credit unions, private lenders, small lending agencies or organizations.
Q: Should I buy the car before the home? A: Making any large purchase that requires credit will jeopardize or change your debt-to-income ratio and thus stop the deal, even at the settlement table. So it’s best to get the keys in your hands first. Besides, if the seller pays for some or all of your closing costs and/or you get funds from special programs, you will have extra money in your pocket to celebrate.
Q: What is the current mortgage rate?
A: Mortgage rates constantly fluctuate and change by the hour. Which is why it is a great idea to lock in the mortgage rate by consulting and getting pre-approved through a mortgage professional.
Q: How long does it take to buy a home? A: A standard sale takes 30-45 days to purchase; a foreclosure can take up to 45 days; a short sale can take 60-90 days to purchase; and cash purchases can be as early as two weeks.
Q: My family member or neighbor is a Realtor. Can I buy or sell my home through him/her?
A: Absolutely. No one has your best interest in mind like a friend or family member and no one knows the neighborhood like one who lives in it and will be able to market the area well because they know the demographics personally.
Q: What is the home buying process?
A: 1. Conduct Research
2. Get pre-approved by a lender
3. Hire a Real Estate Agent
4. Find a home (know that there is no such thing as the perfect home but there’s a perfect home for you)
5. Make an offer/counter offer if necessary
6. Apply for the loan
7. Home Inspection
9. Closing/Title/Exchange of funds
Q: Is a foreclosed home cheaper to purchase?
A: With interest rates being so low right now, not necessarily. But first let’s clarify the difference between a REO (Real Estate Owned) and a foreclosure. Both are sold “as is.” But, an REO has already been through the foreclosure process but was passed up or not purchased by buyers including investors and so the bank holds the property in their possession until they can sell it. Many believe that REOs are safer to buy because the title is likely clear; there are no tenants so you don’t have to go through the eviction process; and the bank usually offers a 20% discount to the buyer so that they can get the property out of their inventory.
A foreclosed property is publically auctioned for sale at the county courthouse. Interested parties submit competing bids to purchase the property and usually the starting price is the remaining balance owed on the property. Whoever bids the highest amount wins the property.
Unfortunately, you are not able to do a pre-inspection, there could be multiple offers on the property that drive up the price (bidding war) and the home could be potentially flooded or damaged. Furthermore, the money that you may have to put into repairs could rise to market value or above and with interest rates being low right now, it’s probably better to look for a standard sale unless you really want to live in a desired neighborhood. Either way, ALWAYS get a thorough home inspection and always have your buyer’s agent give you a comparative market analysis (CMA) so that you can offer fair market value for the property.
Q: Should I buy a short sale?
A: A short sale is when a homeowner owes more on the mortgage balance than what the home will sell for (could be because of refinancing, getting a home equity loan, 2nd mortgages, slow market appreciation in that community, etc..). Either way, the homeowner will have to request permission from the bank or lender to sale the house for the lower amount.
But keep in mind that just because it is a short sale does not mean that there is anything wrong with the property and also be aware that a short sale is a long process with red tape to cut through and lots of parties involved. Therefore, it could take 60-90 days to get to closing but if the home is in a desirable location for you, it will be well worth the wait. But that will also mean that your home search stops, when you send an offer, until you are given the approval or denial.
Q: Should I do a rent to own or rent with option to purchase a home?
A: Admittedly, this is something that I am totally against because there is no protection for the consumer. In other words, there is no official federally regulated program that protects the buyer if something should happen; there are too many loop holes for buyer’s to fail; and the rent to own is a personal choice of landlord/investor and there are no consequences for default. During this rent to own or rent with option process, both parties enter into an agreement; the buyer agrees to pay an extra amount every month to go towards the purchase of a home (eg, rent is $1,300; w/rent to own the rent is an additional $300/per month = $1600/per month to landlord/$300 side aside for purchase).
First, you have no evidence that your money is being saved for the desired purchase and second, there are stipulations in the rental agreement and if you slip up just once, you have forfeited that extra money. So let’s say that the rental agreement states that the rent is due on the 1st of the month and you are doing well for the first 2 years but then life happens and unfortunately one month you pay the rent on the 2nd of the month. Well, using the example above, you have just forfeited $7,200 ($300 X 24 months (2yrs)) because you did not pay on the 1st of the month as the rental agreement stated (breech of contract). And unfortunately there is no federally regulated program with laws that protect you as the consumer.
I suggest that you save on your own. Visit a loan officer because sometimes you may qualify for special financing or so that loan officer can tell you exactly what you need to work on to purchase a home and give you some idea as to how long it will take. And then rent low (if necessary rental prices can be very high) and save the extra money to go towards the purchase of a home.
Q: Are there any home buying programs to help me purchase a home?
A: Absolutely. There are state programs, private organizations that offer help, programs based on occupation and also programs for first time home buyers. Reach out to your agent and/or a loan officer to get you started.