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What
is the difference between "pre-qualified" and
"pre-approved"?
If you are "pre-qualified"
you have determined, with a loan officer, what price you
can afford based on the down payment, your debts and the
amount the mortgage company will approve for your mortgage.
Being "pre-qualified" is only a determination
of your probable credit. If you are "pre-approved",
your credit, employment and funds have been approved by
the lender.
What
are closing costs?
Closing costs are an accumulation of charges paid to
different entities associated with the buying and selling
of real estate. For buyers, they are usually about 4-6%
of the total sales price of a property. Some of the closing
costs you might encounter are: application fees, appraisal
fee, county taxes, credit report, discount points, documentation
fee, escrow fees, homeowners' association fees, load fees,
mortgage insurance, origination fees, tax registration and
title insurance premium.
What
is a point?
One point is equal to 1% of the new loan amount. Whenever
government regulation, state usury laws and/or competitive
practices prohibit the lender from charging a rate of interest
that would make the real estate loan competitive with other
fields of investments, the lender must seek some method
of increasing the yield for the investors. By charging "points",
the lender can bring the real estate loan up to those other
investments.
What
is earnest money?
When you make an offer, you will need to put up an earnest
money deposit as a sign of good faith that you are seriously
interested in buying a home. That deposit becomes a part
of the purchase price and is held in a trust account until
there is full acceptance of the offer. Typically, an earnest
money is 3-5% of the offer amount.
Who
does the real estate agent work for?
This
depends on how the agency relationship was established.
If the seller has listed his or her property with the agent,
then they are the principal/client. The agent works for
the seller in this instance. If the buyer has entered into
a buyer brokerage agreement with the agent, then the agent
works for the buyer. The buyer is the principal/client.
Good real estate practice requires that a listing and a
selling agent provide to their respective principals in
a real estate transaction with oral and/or written disclosure
of which the agent represents in the transaction. A pamphlet,
which describes agency as written by the State of Washington
is made available and given to the clients. If it's a buyer,
a buyer agency agreement is signed by the buyer; for a seller,
a listing agreement is signed.
How
much will my property sell for?
It really depends on
current market conditions. Your true need to sell will dictate
the price you are willing to accept. A lower price will
bring a faster sale. You need to be careful of the "window
of values". Price it too low, in relation to comparable
homes for sale, and you may attract buyers who think it's
a fire sale and you will take even less. Price it too high
and you'll never see an offer. The "just make an offer"
thought never seems to work. The buyer will think if they
do make what they deem a reasonable offer, it may offend
you.
What
is an appraisal?
An appraisal is the process
of formulating, supporting and communicating an opinion
of value. It is usually required when real property is sold,
financed, condemned, taxed, insured, or partitioned. Remember
that an appraisal is an estimate, not a determination of
value. The appraiser does not determine value; parties to
the transaction establish value.
An
appraisal may be in the form of a lengthy written report,
a completed form, a simple letter, or even an oral report.
Note: When a home is being bought, the appraiser most always
uses a pre-printed format and fills in the necessary data
as required by the lenders. The report is prepared in accordance
with the Uniform Standards of Appraisal Practice. The purchaser
will pay for the appraisal, the lender will order it to
be done, and usually the listing agent will be at the home
during the appraisal process. If it's new construction,
often times the builder will also be there.
I
need to insure my home, right?
Correct. In fact, the
lender will require insurance regardless of how big of a
down payment you have. A homeowner's policy is a combined
property and liability insurance policy designed for owners.
There are a variety of these packaged policies designed
for owners of single-family dwellings, for tenants and condominium
owners. These policies can also be endorsed for additional
coverage, such as inflation guard, an art collection, flood
insurance, etc.
Who
does the negotiation for me?
In the true sense of
the word negotiation is the transaction of business with
the aim of reaching a "meeting of the minds" and
final settlement among the parties that are bargaining.
In the case of real estate, it's usually a home, some land,
perhaps investment property that's at stake. The agent who
you hired will negotiate in your behalf. It's sometimes
hard for the people to bargain for themselves and at other
times personalities can get in the way. The agent will act
as a buffer between the parties, and in doing so, will soften
the back and forth offers given by the principals. This
softening can make all the difference in final completion
and total agreement.
Do
I need a bank or mortgage company to buy a home?
The answer is no. If
the owner of a property owns it "free and clear" or has
an underlying loan that is assumable (with or without qualification),
you can buy without using an institution's money. The easiest
way is when the property is free and clear. The real estate
contract is a written agreement between the seller and buyer
for the purchase of real property. The purchase price is
paid in installments, usually principal and interest, over
the life of the contract with the balance due at maturity.
Many things are negotiable; interest rates, amortization
schedule, and cash out time periods. Remember, there may
not be a lender involved (no underlying mortgage) so care
needs to be taken when writing the purchase and sale agreement.
Will
my agent have all the legal papers I need to buy my house?
Your agents real estate
company should supply all the documents necessary for the
purchase of the home.
I
have a time schedule that my company is putting me on. Timing
is very important to my family, how can we be assured everything
will go smoothly?
A seasoned agent can
help enormously. Getting everything agreed to up front in
the original purchase and sale agreement is vitally important.
No surprises, that's my rule. Especially the move out date
for the seller, and the move in date for the buyer. It can't
be the same day. Sounds nice on paper, but in reality it
can be a nightmare. Make sure your agent has a firm grip
on the various areas of timing in the transaction. Getting
the needed repairs done on time, when to order the appraisal,
when to order the home inspection, will water tests be necessary,
how about the septic tank, should it be pumped? These are
just some of the timing issues your agent should know about.
Will
I need a home inspection? After all, I'm getting an appraisal.
The home inspection
is done for the buyers and is paid for by the buyers. The
appraisal is done for the lender, and is also paid for by
the buyers. Home inspections are usually done when the buyer
sees an older home that they want to buy and is unsure of
it's current condition. Home inspections are very thorough
indeed. All aspects of the homes integrity are checked out.
Electrical, plumbing, roof, foundation, appliances, pest
and dry rot, gutters, siding, just about anything you can
think of is looked at and gone over. Many homebuyers are
starting to get home inspections on new construction as
well. Peace of mind is what it's really all about, and it's
worth every dime.
I've
never owned a home, what is a mortgage?
It is a legal document
used to secure performance of an obligation, a pledge to
pay back a loan. In the real estate transaction, the buyer
of the real estate needs or wants to borrow money to pay
the seller the difference between the down payment and the
balance of the purchase price. When the lender loans the
money, the buyer-borrower is required to sign a promissory
note for the amount borrowed and execute a mortgage to secure
the debt. The purpose of the mortgage note is to create
a personal liability for payment on the part of the borrower.
The purpose of the mortgage is to create a lien on the mortgaged
property.
In
effect, the mortgage states that the lender can look to
the property in the event that the borrower defaults and
fails to make payments on the loan. The lender can start
foreclosure proceedings to sell the property and retain
that part of the proceeds from the sale to pay the remaining
unpaid balance of the note.
What
is title insurance?
Title insurance protects the named insured against loss
because of defects, liens, encumbrances, adverse claims
or other matters not shown or disclosed to the new owner
that attach before date of policy.
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