Residential Sales FAQs
Should I use a real estate broker?
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.
What is the difference between pre-qualified vs. pre-approved
Pre-qualification is a quick process. A lender asks you for basic information (income, employment information, credit and liabilities) and tells you what price range you should be considering. Important: Pre-qualification does not mean you have been approved for a loan. If your loan is pre-qualified, when you find a house you want to buy, you'll still need to go through the loan approval process.
Pre-approval takes longer and is a more comprehensive process. But when your loan is pre-approved, you can move quickly. When you find a house you want, being pre-approved tells the seller you're serious - and it could give you an advantage in negotiation. A lender doesn't commit to a loan until you've found a specific property. Once you've found the home you want to buy and your loan is approved, the lender will make a final decision.
How do I determine how much I can afford?
Plan ahead by listing out your sources of income, savings, monthly expenses, and other cash-flow considerations. Contact a loan officer to get pre-qualified. Sellers will be more interested in your offer if they know you have been pre-approved.
How much money will I have to come up with to buy a home?
That depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies. If you buy a HUD home, for example, your deposit generally will range from $500 - $2,000.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to HUD's FHA for help. FHA loans require only 3% down - and sometimes less.
Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. If you buy a HUD home, HUD may pay many of your closing costs.
How do I find a lender?
You can finance a home with a loan from a bank, a savings and loan, a credit union, a private mortgage company, or various state government lenders. Shopping for a loan is like shopping for any other large purchase: you can save money if you take some time to look around for the best prices. Different lenders can offer quite different interest rates and loan fees; and as you know, a lower interest rate can make a big difference in how much home you can afford. Talk with several lenders before you decide. Most lenders need 3-6 weeks for the whole loan approval process. Your real estate broker will be familiar with lenders in the area and what they're offering. Or you can look in your local newspaper's real estate section - most papers list interest rates being offered by local lenders. You can find FHA-approved lenders in the Yellow Pages of your phone book. HUD does not make loans directly - you must use a HUD-approved lender if you're interested in an FHA loan.
Why should I list my home with a real estate agent instead of selling it myself?
An agent would be responsible for all aspects of selling your home including: advertising, following up on potential leads, accurate and timely completion of all paperwork, following the laws and disclosures required when selling real estate.
What is a listing agreement?
If you do decide to hire a real estate agent to assist you in selling your home, he or she will define the terms of your agreement in writing. This is called a listing agreement. The agreement will cover such items as: length of time the agreement covers, commission to be paid to the agent, advertising or other promotional materials the agent will provide, and sale price of the home.