Home Buyers: Frequently Asked Questions

Whether a buyer is purchasing their first home or their fifth home, the home buying process can create many emotions and feelings. One of the best ways to ensure the process is not overwhelming for a buyer is to be well educated and properly prepared for the process.

There are normally many questions that home buyers will have throughout the process. Even an experienced home buyer can forget exactly how the process works and what the proper steps are to ensure the process is relatively smooth.

When buying a home, one of the most important things to understand is that “no question is a dumb question.” If you’re unsure of something when buying a home, ask!

There are many questions that home buyers seem to ask quite often. Some questions are before starting the home buying process, during a house hunt, while writing a contract, or after an offer is accepted. Here are the top frequently asked questions from home buyers.

Questions Asked By Buyers Before Starting The Home Buying Process

Search FAQs:
  • What home can I afford?

    That depends, of course—on your income and other financial obligations; plug them into How Much Can I Afford Calculator for a ballpark figure. And do it before you start shopping - if you see houses you love outside your price range, it opens you up to disappointment. Meet with a lender to get pre-approved for a home loan (added bonus: pre-approval makes you much more attractive to sellers).

  • What’s the first step of the home buying process?

    The Mortgage Pre-Approval. - Unless you are paying cash for a house, you will need to get a mortgage. In order to know how much home you can afford, you will need to get pre-approved for a loan. This is the first-step in the home buying process.

  • Can I check my credit rating before I apply for a mortgage?

    Everyone's credit rating is based on a combined score that is generated from three credit bureaus that look at your credit history, amount of credit available, and the recent inquiries that determine what is called your FICO score. For a small fee, you can get your score or review your credit report by going online to www.myfico.com or by contacting the credit bureaus directly at:

    • EQUIFAX www.equifax.com
    • EXPERIAN www.experian.com or (888) 397-3742
    • TRANSUNION www.transunion.com or (800) 916-8800

  • What Kind of Credit Score Do I Need to Buy a Home?

    A 620 credit score, or higher, is recommended. As you are probably aware, a higher credit score offers better lending terms. This is an ever evolving topic, however, as loan requirements are constantly changing. There are some lenders who will approve buyers with a 580 score, sometimes even lower. Your loan officer will be the best source to give you a current answer for today’s lending requirements.

  • How are pre-qualifying and pre-approval different?

    Pre-qualified: the initial step in the mortgage progress, a lender or bank will calculate the general mortgage amount you qualify for. This is done by evaluating your debt, income and assets.

    Pre-approval: This comes after pre-qualification. You will make an official application for a mortgage and the lender will perform an extensive check of your financial background and current credit rating. After which the lender will tell you the amount you have been approved for.

    The main benefits of obtaining pre-qualified and pre-approval are 1) knowing exactly how much you can spend on a home so you do not waste your time looking at homes beyond your means. 2) This makes you more appealing to a seller as you are closer to having an actual mortgage.

  • How do I choose a lender?

    When you are ready to shop for a loan you have two basic types of mortgage stores to shop -- direct lenders and mortgage brokers. Direct lenders, like your bank, have money to lend. They make the final decision on your application. Brokers are intermediaries who have many lenders from which to choose. Direct lenders have a limited number of in-house loans available. Brokers can shop many lenders for each lenders' store of loans. If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need. On another note, some home buyers fail to stay up with the requirements of the lender as the home progresses to closing and then find themselves way behind in the process at the very last minute. Sometimes this can lead to delay or even cancellation of the house closing and frequently can happen when a buyer uses an internet lender. We can help you take care of your end of the deal by staying on the same page as the lender all the way through the process. And remember to choose a lender that you are confident will be able to be reached easily by phone when questions or problems need to be addressed immediately.

  • How Much Money Do I Need for a Downpayment?

    It depends on your loan type. Usually 3% to 5% down - The most common answer is 3% to 5% of the purchase price. FHA loans just dropped their requirement from 3.5% to 3.0%. There are also some conventional loans that only require 3% down. Veterans are usually eligible for a VA loan, which requires no money down. Properties in rural areas are usually eligible for a USDA loan, which also requires no money down.

  • What Other Fees Are There, Besides the Downpayment?

    Mainly loan origination and closing costs. - The downpayment is usually the largest cost associated with buying a house. Lending fees are the second largest costs to homebuyers. Most lenders will charge between 2% to 4% of the loan amount for loan origination fees, depending on the loan type. Conventional loans usually have lower loan origination fees, but require more money down. Your loan officer will be able to help you determine how much you can expect to pay towards loan origination and closing costs.

    For a detailed list of all potential home buying fees, see our article entitled “How To Avoid Sticker Shock at the Closing Table?”

  • Do I really need a Realtor when buying a home?

    When buying a home, it’s strongly recommended you have a Realtor.  There are many reasons why you should have a Realtor represent your best interests when buying a home.  Keep in mind, all Realtors are not the same!  When choosing a buyer’s agent, make sure you know how to interview prospective Realtors when buying a home.

    Attempting to buy a home without a Realtor can really make the home buying process more difficult.  Having a Realtor is always recommended when buying a home.  One thing not to do when buying a home is calling the listing agent because you don’t want to “bother” your Realtor.  This is one thing that real estate agents hate.

  • Who pays the Realtor fees when buying a home?

    One reason why buyers ask the question about the need of having a Realtor when buying a home is because they don’t understand who pays the Realtor fees when buying a home.  There are no guarantees, however, in most cases the seller pays the Realtor fees.

  • Should I buy or continue to rent?

    Buying a home can be a very solid investment.  This being said, renting can also be a better option for some, depending on the circumstances.  The current interest rates are incredible.  A 30-year FHA mortgage can be locked in at a rate of around 3.5%.  Since the interest rates are so low, it actually can be cheaper to pay a mortgage right now than paying rent.

    There are questions that you should ask yourself before deciding to buy a home.  One of the most important things to consider is the length you plan on staying in a home, if you were to purchase.  If the answer is only a few years, it’s likely the better decision is to continue renting.  Another question to ask yourself is whether you are ready to take on the additional “responsibilities” of owning a home.  When owning a home there will be general home maintenance that should be done, are you ready for that?

    Buying a home is a great option in many cases, but not always.

  • Can I find a rent-to-own property?

    Can you find a needle in a haystack?  Of course you can, but the probability isn’t very high.  The same can be said about a rent-to-own property.  A common question from home buyers is whether rent-to-owns exist or whether an owner would consider that option.  They are out there, but there are somethings that you need to know before agreeing to a rent-to-own.

    When an owner is offering “rent-to-own” as a possible financing option, they are taking on a high risk since in most cases, a rent-to-own buyer has a credit score that is not impeccable.  Since an owner is taking a higher risk the terms for a rent-to-own must be considerably favorable for the owner.  This often leads to less than favorable terms for a buyer.  When looking at a rent-to-own as an option you can expect to provide a considerable amount of money down and a higher interest rate than what a lender is currently offering.

    If you’re able to purchase a home by financing through a bank or lender, you will be better off because the terms will be more favorable.

  • Should I sell my current home before buying another?

    There is truly no concrete “correct” answer to this question.  There are pro’s and con’s to buying a home before selling your current home and the same can be said about selling your current home before buying another.

    Buying a home before selling your current home
    The biggest benefit to buying a home before selling your current home is the fact that you have a suitable property lined up.  This can reduce the stress and pressure of having to find a home once your current home is sold.  This however also can create disappointment and heartbreak.  If you are unable to purchase a new home without having to sell your current home, you’re purchase offer is going to be contingent upon sale and transfer of title of your current home.  If your current home does not sell in a timely manner, this can lead to you getting “bumped” by a non-contingent buyer and you losing out on the home you’re looking to purchase, which can be devastating.

    Selling your current home before buying a new home
    The time it takes to sell your current home is unpredictable.  There is no crystal ball that exists that can tell you exactly how many days it will take.  Selling your current home before buying a new home will put you in an ideal position to negotiate on the new home you’re purchasing due to the fact you are purchasing without the sale contingency of your current home.

    One risk of selling your current home without buying a new home first is the chance of not being able to have a place to live.  There are options if your current home sellers before buying another though.  A “rent-back” can sometimes be negotiated with the buyer of your current home.  A “rent-back” would allow you to retain possession of your current home for a certain number of days after closing at the expense of paying the buyers mortgage.  A “rent-back” allows for additional time to find a new home.

  • How quickly can I close?

    Typical escrow periods are 30 to 45 days. This gives you enough time to do the investigation on the property and get a loan completed, and yes, this due diligence counts.

  • How many homes should I see before making an offer?

    For the most part, you want to see a number of homes so that you can become familiar with what you expect to get for your money. Some buyers find a home that "fits" after only a few trips and for some it just takes longer. It depends on the inventory at the time you are looking and also on your own wants and needs. When you do find a home that you really like, it's a good idea to go back and look at it during a different time of the day. This will give you some better insight into what it will be like living in the home full time.

  • What should I think about when deciding which community to live in?

    It is important to understand what you have planned for your future. If you are raising (or planning on raising) a family then you may wish to find a community with a high percentage of new families with child friendly activity centers (municipal pools, parks, etc.). Every area has its own school district. If you have a specific school in mind then you will need to figure out which homes are within said district.

    Whether you are planning to start a family or not, there are other factors which are just as important to consider. For many people, proximity to friends and family must be considered as well as the length of the commute to work. If you do not own a vehicle then you will also need to consider public transportation options.

    Don't forget about food. Traveling to a supermarket or a restaurant costs both time and money so having it close at hand will save you money in the long run.

    When you talk with your real estate agent mention your future plans and they will factor those into your buying options.

  • What should I look for when walking through a home?

    It is recommended that you have a home inspector examine the property but here are some tips on what to look for during your first time viewing a home.

    Good foundations are extremely important in purchasing a home. If you have access to the basement then check the walls for cracks. Cracks in the foundation happen naturally as the house settles but you should look for vertical cracks and ones that are larger at one end than the other. Next when you are on the top floor check the doors and windows to see if they open and close easily. If a foundation has shifted then the top floor will have moved the most.

    Water damage is very important to check. Inspect ceilings on every floor for discoloration or bubbles in paint. Check the basement for any discoloration in the concrete around cracks and look to see if you can find signs of mold and mildew. When outside the house look at the eaves as they are responsible from moving rain water away from the foundation.

    Don't forget to check every faucet, toilet and showerhead to see that the plumbing works well.

  • What is a short sale?

    Before getting involved with a short-sale, it’s important you understand exactly what it is and what to expect from a short sale.  The easiest way to understand a short sale is the sale of a home in which the proceeds from the sale are less than the balance of debts secured by liens against the property and the home owner cannot afford to pay the liens in full.

    Before purchasing a short sale, you should consider things such as the time it can take for a short sale response, the fact that a foreclosure is still possible, and that many short sale properties are in disarray.  Short sales are not impossible to buy but you must be patient and be in no immediate rush to move.

  • What is a foreclosure?

    Believe it or not, foreclosures can actually be a smoother transaction than a short sale.  A foreclosure, sometimes referred to as a REO, is a property that is owned by a lender.  If you’re considering the purchase of a foreclosure, it’s important to understand that most are sold “as-is.”  Foreclosures, if not purchased by an owner occupant, are often purchased by investors, fixed up, “flipped,” and sold to an owner occupant.

  • How much should I offer?

    This is a question your agent will help you with as the answer is specific to the property. However, some factors that must be considered are:

    • Is the house in good condition?
    • Will you need to make renovations for it to suit your needs?
    • How long has it been on the market?
    • Is the asking price comparable to other similar homes in the area?

  • How do I know if the property is a good deal?

    While there is no crystal ball on whether a certain home is a bargain and will appreciate, rest assured that with research, you can keep surprises to a minimum. The best way is to check out comparable sales — what similar properties are selling for in the area—“and whether those prices have been going up or down in the recent past.

  • What if my offer is rejected?

    When a purchase offer is submitted to the seller there are generally four possible responses.  The first is an accepted offer, the second is a counter offer, the third is a rejected offer, and the final is an offer that is not responded to.  If your offer is rejected, meaning the seller says no and doesn’t counter, you have the right to place another offer.  It’s not very common an offer is rejected or not responded to, unless a seller is offended by a low-ball offer.

  • When can I back out if I change my mind?

    While buyers can always back out of a deal, doing so without good reason may forfeit their earnest money (the cash put down to secure the offer, typically 1%-3% of the home’s price). But there are some ways to walk with your earnest money in hand.

    Contingencies: For example, upon an unsatisfactory home inspection, the buyer can ask for their deposit back. Another contingency is ‘subject to appraisal'. That means you can back out if the lender for your loan doesn’t think the property is worth what you offered.

    Home buyers aren’t the only ones with questions; home sellers have plenty on their minds, too. Find out what they are wondering in a new article next week!

  • Is a home inspection necessary? What other inspections are needed?

    Mortgage lenders will typically require an inspection for wood destroying insects. It is usually paid for by the buyer. A comprehensive home inspection is something that the buyer orders. They must be done within a specified period within the time frame of the agreement of sale parameters. It is not required which is why the buyer pays for it but it is a wise thing to do. We highly recommend that, at the time of the inspection, you accompany the inspector as he/she does their inspection. This is important so you can learn firsthand as much as possible about the home you are about to purchase-including such basics as where the main water shut-off and electrical distribution boxes are. Is a home inspection worth the price? Consider this. Home inspections cost between $200 and $400. Weigh that against the comfort of moving into a known situation, and the answer is obvious ... get a home inspection!

  • What’s the age of the house?

    When looking at homes, many buyers want to know the ages of specific items in a home.  The most popular items in a home that buyers want to know about are the major mechanical items, such as the roof, furnace, water heater, and air conditioning (if applicable).  An experienced Realtor should be able to find the dates of a furnace, water heater, and air conditioning unit by looking at the serial numbers.  The roof age is often known by the home owner.  If not, the age usually can be approximately determined by looking at the roof characteristics, such as the sagging areas and the way the shingles are laying.

  • What are home warranties?

    Not to be confused with homeowners insurance which covers perilous damage like fire and property crimes, home warranties cover components in the home. The contract will disclose exactly what the home warranty company will cover but often the company provides discounted repair or replacement on things like furnaces, HVAC systems, electrical systems and plumbing systems.

  • What’s the next step?

    Congratulations!  Your offer was accepted, now what?  Between contract acceptance and the closing date, there are many things that need to be completed.  In a nutshell, after an offer is accepted, generally any inspections will be completed.  After the inspections, you complete a formal mortgage application and last but not least, the title, abstract, survey, and any miscellaneous paperwork is completed.  When buying a home, finding the perfect home is only one part of actually becoming a homeowner.  Throughout the mortgage process, you should expect the bank to require documentation, letters, and other items from you to satisfy the bank conditions, so don’t be upset or surprised when this happens.

  • What is title insurance and why do I need it?

    Title insurance assures that you have clear title to the home you are purchasing. It's very important and the primary component of "due diligence". The title search determines whether the seller actually owns the property and if there are any claims against it. In most cases, the buyer pays for the insurance. We work with a number of very good title companies or you can choose to use your own. In any case, the title search is ordered shortly after an agreement of sale is reached and then paid for at settlement. The price is state mandated.

  • How about some advice on Homeowners Insurance?

    A standard homeowner’s policy protects against fire, lightening, wind, storms, hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke, vandalism, theft, breaking glass, falling objects, weight of snow or sleet, collapsing buildings, freezing of plumbing fixtures, electrical damage and water damage from plumbing, heating or air conditioning systems. Such policies are called "all risk" policies, which cover everything except earthquakes, floods, war and nuclear accidents. A basic policy can be expanded to include additional coverage, such as for floods and earthquakes and even workers' compensation for servants or contractors. Home-based business-coverage, an increasingly popular rider, does not cover liability associated with the business. Insurance experts recommend that homeowners obtain insurance equal to the full replacement value of the home. On a 2,000 square foot home, for example, if the replacement cost is $80 per square foot, the house should be insured for at least $160,000.

  • Do I need to do a final walk-through?

    As a buyer, you have the option to perform a final walk-through.  Is a final walk through a requirement?   NO.  Is a final walk through necessary?  YES.  Generally when buying a home several weeks go by between when you last walked through your home.  Lots of things can change during that time.  When doing a final walk through a few things you should check is that furnace is working, the toilets are flushing properly, and there is hot water.

  • When is the closing date?

    When buying a home, the excitement level is extremely high.  It’s important to understand that the closing date in the purchase offer is a target and not a guarantee.  Before you hire the movers and take time off from work, know that the closing date in the contract isn’t necessarily the date you will own your new home.  Many buyers will ask their Realtor this question, however, it isn’t up to the Realtors when a closing will be.  The attorney’s are the ones who have to set the closing date and time.

  • When do I get the keys?

    The short answer is “At Closing”. Under normal circumstances, you will get the keys at the closing. A closing typically takes about an hour. In some cases, the lender will need time to fund the loan and you will need to pick up the keys after the loan has been funded. If you have a Friday evening closing and the loan cannot fund until Monday, you may not get the keys until Monday. Make sure to coordinate your closing to get the keys on the same day, if that is what you need.

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Final Thoughts

When buying a home, being prepared and well educated can really make a huge difference. Again, “no question is a dumb question” and if you are unsure of something, ask! The home buying process begins before you ever look at one home and the process continues all the way up to the final walk-through. When buying a home, it’s critical you’re on your game, stay organized, and remain focused throughout the entire process. After reading these frequently asked questions, you should now have a stronger understanding of what to expect throughout the process.