Answers to Commonly-Asked Real Estate Questions, Part 2
Last Monday, we examined some of the most commonly-asked questions home buyers and sellers ask when buying or selling a property. Today, we delve into eight more questions and provide answers for them so you can be better prepared for your next meeting with a real estate agent. Knowing these now can certainly help streamline a real estate transaction.
8. How much do I need for a down payment?
Photo: Consumers Credit Union
The national average for down payments is 11%. But that figure includes first time and repeat buyers. Let’s take a closer look.
While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military service members. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).
9. Should I sell my current home before buying a new one?
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If the built-up equity in your current home will be applied to the down payment on the new home, naturally the former will need to be sold first.
Some home buyers decide to turn their current home into an investment property, renting it out. In that case, the current home will not need to be sold. However, your loan advisor will still need to evaluate your risk profile and credit history to determine whether making a loan on a new home is feasible while retaining title to the old home.
Buyers often have a short time frame to sell their current home when relocating to a new city because of a job transfer. If you are moving but taking a position with the same employer, check to see if they offer relocation assistance to help offset some of the costs.
10. How many homes should I view before buying one?
Photo: Doug Francis Realtor
That’s 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.
11. What is earnest money?
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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.
The check (or sometimes cash) is deposited in a trust or escrow account for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.
Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your agent about the ways to protect your earnest money deposit and the ways to protect it – such as offer contingencies.
12. How long can the seller take to respond to my offer?
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Written offers should stipulate the timeframe in which the seller should respond. Giving them twenty-four hours should be sufficient.
13. What if my offer is rejected?
Sellers can flat-out accept or reject an initial offer. But there a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal isn’t dead until it’s dead. So, if a counteroffer is proffered by the seller, you’re still in the game. You and your agent just need to review it determine whether the counteroffer is acceptable. If so, then approving it closes the deal immediately. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual and negotiations are a part of what Realtors do as a matter of routine. Each revision should bring both parties closer together on the terms of the deal.
14. Should I order a home inspection?
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.
15. Do I need to do a final walk-through?
It’s not required, but it’s a darn good idea! Final walk-throughs give buyers a chance to make sure nothing had changed since their first visit. If repairs were requested, as part of the offer, a follow-up visit ensures that everything is squared-away, as expected, per the terms of the contract.