Real estate is a complicated field to navigate and, as such, real estate agents get asked countless questions daily. Part of the real estate agent’s job is to guide people through complex processes and simplify difficult concepts for their clients.
If you are a first time home buyer or an experienced buyer and seller who simply needs a refresher on how things get accomplished, here are some of the most common questions that come up.
What is the first step to buying a home?
The very first step is to apply for pre-approval from a mortgage lender. A pre-approval letter will help start the process and usually will open the door to making an offer for a few reasons.
First, if you need to borrow, you need to know how much you can borrow. Buying a house is similar to buying any other large purchase. Before you buy a car, you need to know what you can afford, and a house is no different in that respect.
Also, getting a loan estimate and offer will usually stipulate how much you will be required to have as a down payment. You may find that in order to get the best offer, you either need to save more money, liquidate some assets, or possibly even raise your credit score to reduce interest.
Lastly, having a pre-approval letter shows the seller and the agent that you are a serious buyer, and you are not going to waste their time.
How long does the home buying process take?
This can vary quite a bit; however, a reasonable estimate from browsing online listings to closing escrow, is around 12 weeks. Cash buyers can significantly reduce that time if they are well-prepared.
What does a “seller’s market” mean?
In a seller’s market, the demand for homes outpaces supply, so home prices spike. Some factors that can affect demand include a large influx of residents to an area or dropping interest rates, which leads more people to take out mortgages and buy homes.
What does a “buyer’s market” mean?
A buyer’s market means the supply of homes has outpaced the demand for homebuyers. Factors that can create a buyer’s market include excess inventory, like the construction of new subdivisions, natural disasters that drop property values, and upward trending interest rates that reduce the number of potential buyers.
What does it mean when the market is stratified?
Market stratification generally occurs within a given geographic area, where houses above or below certain values have differing supply and demand ratios. For example, houses valued over $1M may be in high demand, creating a seller’s market, while houses below $250k may not be selling like they were the month prior, creating a buyer’s market.
How much will I need to pay my real estate agent when buying a home?
Buyers tend to pay little or no agent fees when buying a home. Listing brokers who represent the sellers, charge a fee for that representation. The buyer’s agent is compensated by the listing broker for bringing buyers to the table. The listing broker and the buyer’s agent will generally negotiate some form of splitting the fee, so buyers do not have to pay extra.
What credit score will I need to buy a home?
Most lenders require a minimum FICO score of 620. Of course, having a higher score means you pose less risk to the lender, and that generally provides lower interest and lower down payment requirements. Lower scores may need to offset their risk with a larger down payment.
How much is the average down payment?
The broad, national average is around 11% of the value, but this is an aggregate of first time and repeat buyers. First-time homebuyers generally enjoy a low down payment due to first-time homebuyer’s programs such as FHA loans. These can go as low as 3.5% down.
Should I sell my current home before I buy?
If you plan on reinvesting your built-up home equity in your new home, then yes. If it is not your first home, you may also choose to keep your existing home and use it as an investment property by renting it out and generating income from it.
How many homes should I see before making a choice?
This one is completely up to you. Some buyers find the home of their dreams after only viewing a few homes. For others, it can be a grueling process to find that gem. You will have the home for quite some time, so make sure you wait to find a home that you love.
What is earnest money?
When you initially make an offer, your agent will request a show of good faith by asking for a check for 1%-2% of the value as earnest money. This is usually placed in escrow and is applied to closing costs. If the buyer backs out from an agreed-upon deal, then they will likely lose the earnest money.
How long should I wait for a response to my offer?
When you present a written offer, ensure that you stipulate the timeframe in which they should respond. Generally, twenty-four hours is sufficient.
What if my offer is rejected?
More often than not, an offer will not be rejected outright but you will receive a counter-offer. If presented with a counter-offer, give it serious thought and talk it over with your agent. It may be acceptable, or you can send a counter-off back to be considered by the seller.
Do I need a home inspection?
Absolutely. In fact, if you are financing with an FHA or VA loan, they are required. Even if not required, however, it is a valuable part of due diligence and can reveal issues with the home that were not previously disclosed.
What about a final walk-though?
This is always a prudent idea. If you have not been in the home since you first viewed it, then a month or two may have passed. If repairs were requested as part of the offer to buy, it is a great idea to make sure the seller followed through on those repairs. A final walkthrough is a perfect time to make sure that everything is exactly how it is stipulated in the contract and closing documents.
Call Wendy Gimpel, Real Estate Professional in Minnesota
We know that you have lots of questions, and we are happy to answer them for you! Wendy Gimpel is a real estate agent who serves all of Minnesota and Wisconsin. Based out of Stillwater, Minnesota, Wendy has years of experience in staging, buying, and selling homes. Give Wendy a call today and set up an appointment!