home buying frequently asked questions

---

 Many homebuyers make the mistake of obtaining a mortgage pre-approval only after they find the perfect home. A pre-approval should be obtained prior to the touring homes. During the pre-approval process, you will know how much down payment you will need, interest rates, estimated monthly payment and estimated closing costs. 

 Most loan programs require a FICO score of 600 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower down payment requirement and better interest rate. Conversely, home shoppers with lower credit scores may need to bring more money to the table (or accept a higher interest rate) to offset the lender’s risk. 

 The answer is nothing. Agents who represent buyers (a.k.a. buyer’s agent) are compensated by the listing broker for bringing home buyers to the table. When the home is sold, the listing broker splits the listing fee with the buyer’s agent. Thus, buyers do not pay their agents. 

 When you make an offer on a home, your agent will ask for a check to accompany it (checks are the same as cash, and the deposit is typically 1% to 2% of the purchase price). Earnest money is made in good faith to demonstrate – to the seller – that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you. Earnest money is applied to the down payment and closing costs. 

 That is up to you! For sure, home shopping today is easier today than ever before. The ability to search for homes online and see pictures, even before setting a foot outside the comfort of your living room, has completely changed the home buying game. Convenience is at an all-time high. But nothing beats visiting a home to see how it looks and ‘feels’ in person. 

 It is important to know what your budget is before you start searching for a home. This can be determined during the pre-approval process. If you already have a monthly note in mind, then the mortgage loan officer can set a price range based your income and financial stability. 

 Sellers can flat-out accept or reject an initial offer. But there is a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal is not dead until it is dead. So, if a counteroffer is proffered by the seller, you are still in the game. You and your agent just need to review it to determine whether the counteroffer is acceptable. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual, and negotiations are part of what realtors do as a matter of routine. 

 Yes! Home inspections are required if you plan on financing your home with an FHA or VA loan. For other mortgage programs, inspections are not required. However, home inspections are highly recommended because they can reveal defects in the home that are not easily detected. Home inspections bring peace of mind to one of the biggest investments of a lifetime. 

In a sellers’ market, increasing demand for homes drives up prices. Here are some of the drivers of demand:

• Economic factors – the local labor market heats up, bringing an inflow of new residents and pushing up home prices before more inventory can be built.
• Interest rates trending downward – Improves home affordability, creating more buyer interest, particularly for first time home buyers who can afford bigger homes as the cost of money goes lower.
• A short-term spike in interest rates – may compel “on the fence” buyers to make a purchase if they believe the upward trend will continue. Buyers want to make a move before their purchasing power (the amount they can borrow) gets eroded

A buyer’s market is characterized by declining home prices and reduced demand. Several factors may affect long-term and short-term buyer demands like: Economic disruption – a big employer shuts down operations, laying off their workplace.

• Interest rates trending higher – the amount of money the people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential buyers in the market. Home prices drop to meet the level of demand and buyers find better deals.
• Short-term drop-in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.
• High Inventory – a new subdivision can create downward pressure on prices of older homes nearby, particularly if they lack highly desirable feature (modern appliances, etc.)
• Natural disasters – a recent hurricane or flooding can tank property values in the neighborhood where those disruptions occurred.