Got Questions? We’ve Got Answers!
We at Lifestyle Real Estate Services pride ourselves on marketing properties like no other, but we take just as much pride in empowering our clients with the knowledge, details and answers they need to make smart decisions. To that extent, we’ve put together a small collection of frequently asked questions to let you decide if now is the time to consider buying, selling, or investing.
- Do I have a steady source of income (usually a job)?
- Have I been employed on a regular basis for the last 2-3 years?
- Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have money saved for a down payment?
- Do I have few outstanding debts, like car payments?
- Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer “yes” to these questions, you are probably ready to buy your own home.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
- Is there enough room for you and/or your family, both in the present and the future?
- Are there enough bedrooms and bathrooms? (Keep in mind any guest rooms you may want/need.)
- Is the home structurally sound? If not, are you willing to pay more for any required work to be done?
- Do the mechanical systems and appliances work?
- Is the yard big enough?
- Do you like the floor plan?
- Will your furniture fit in the space? Is there enough storage space?
- Imagine the home in good weather and bad – will you be happy with it year round?
Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.
Keep in mind, there isn’t a set number of houses you should see before you decide which home is for you. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Be sure, though, to communicate often with your real estate agent about everything you’re looking for. It will help you to avoid wasting your time, and they’ll be able to help you narrow down your search based on your requirements and “wish lists”.
The inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced. Yelp is a great resource for finding and researching a home inspector.
It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house “as is.” Optionally, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an “out” on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.
Keep in mind that, while it’s not required, but it’s a good idea to be present during inspections. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d like to purchase and it is a good time to ask general, maintenance-related questions.
- Complete legal description of the property
- Amount of earnest money
- Down payment and financing details
- Proposed move-in date
- Price you are offering
- Proposed closing date
- Length of time the offer is valid
- Any additional details of the deal
Remember that a sale commitment depends on not only simply making an offer, but also negotiating a satisfactory contract with the seller.
Listen to your real estate agent’s advice, but also follow your own instincts on deciding a fair price. Calculating your offer should involve several factors, including what homes are selling for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. Be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth with offers and counter-offers until they can agree on a price.
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. Keep in mind, if you back out of a deal, you may forfeit the entire amount.
Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner’s insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.
Pre-approval is a lender’s actual commitment to lend to you. It involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.
A good faith estimate is an estimate that lists all fees paid before closing, any closing costs, and escrow costs you will encounter when purchasing a home. The lender must supply it within three days of your application so that you can make accurate judgements when shopping for a loan.
It can typically take a lender between 1 to 6 weeks to complete the evaluation of your application. It is not unusual for a lender to ask for more information even after your application has been submitted. The sooner you can provide information, the faster your application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date will be set, and the lender will review the closing with you. After the closing, you’ll be able to move into your new home!
In most cases, this will likely be your first opportunity to examine the house without furniture, giving you a clear view of everything inside the property. Take this opportunity to carefully inspect things like closets, walls, ceilings, and anywhere that furniture may have been placed. Also, inspect any work the seller agreed to complete in response to inspections. Any problems discovered previously that you find uncorrected should be brought up prior to closing, as it’s the seller’s responsibility to fix them.
- Attorney’s or escrow fees
- Property taxes (to cover period to date)
- Interest (paid from date of closing to 30 days before first monthly payment)
- Loan Origination fee
- Recoding fee
- Survey fee
- First premium of mortgage insurance (if applicable)
- Title insurance
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt of homeowner’s insurance policy
- Any documentation preparation fees
Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You’ll pay the lender’s agent all closing costs and, in turn he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will then be a homeowner.
- Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
- Mortgage Note
- Mortgage or Deed of Trust
- Binding Sales Contract (prepared by the seller)
- Keys to your new home!
One More Question?
These are just a small sample of questions that a potential home buyer may have. Sellers can, and will, have a whole slew of additional questions regarding transactions, as well.
For any and all questions you may have about a real estate transaction, whether you’re a buyer, seller, or investor, feel free to send us a message, or give us a call at (925) 230-8375. We’ll be happy to help you out!