Buyer Frequently Asked Questions

— What Steps Are Involved In Buying A Home?

After you make the decision to buy a home, you’ll want to plan a budget and contact a real estate professional to guide you through the entire process. You’ll also need to research and compare available lenders to finance your home beyond your down payment. Your real estate professional will likely be able to suggest prospective lenders if you need assistance in choosing one. A lender will pre-qualify you for a loan in the amount it determines you to be able to afford, so that sellers will consider you a serious and capable buyer. Once you’re pre-qualified, your real estate professional will begin showing you possible homes. When you decide on a particular home, your real estate professional will make an offer on your behalf to the home’s seller-usually for a price slightly less than the asking price. This may lead to a counter offer, meaning that the seller tries to negotiate your purchase price closer to his or her original asking price. Once both parties agree on an amount, your real estate professional will work with a title insurance agent and/or escrow officer to draft all necessary paperwork. He or she will then schedule a date for you and the seller to meet for the closing, where the transaction is completed and ownership is officially transferred from seller to buyer.

— Do I Need A Real Estate Agent?

Real estate agents can help you narrow your housing options. The U.S. Department of Housing and Urban Development recommends the use of a real estate agent. Make sure the agent works for you so the agent will be working for your interests. Your agent can take your criteria for a home, including cost, neighborhood, schools, home size and amenities, and match it with the Multiple Listing Service (MLS), which lists all of the homes for sale in a particular area. If you’re purchasing government housing, such as a HUD home, you must have an agent.

— Can I Afford A Mortgage?

Before beginning the purchase process, make sure you can afford the home. Most lenders adhere to standards set by Fannie Mae, which buys and sells mortgages on the secondary market. Lenders want to see that your total monthly housing payment is no more than 28 percent of your gross monthly income, and that your total monthly debt payments are no more than 36 percent of your total gross monthly income.

— What Are The Up-Front Costs?

You are responsible for two upfront costs when you buy a home. First there is earnest money, which is a small deposit that lets the seller know you’re serious about buying the home. Earnest money can be anywhere from $500 to $2,000. The second is the down payment, which is a percentage of the cost of the home. Lenders have different requirements for down payments. Traditional lenders usually seek a down payment of at least 10 percent. Lenders backed by the government can seek less, if you qualify. FHA has a program where you are only required to make a 3 percent down payment.

— What Happens At Closing?

Closing is when you sign all of the loan and ownership paperwork and take over the home. At closing you will be responsible for taking care of some costs, including title insurance and points to lower the interest rate on your mortgage, along with fees for loan origination, loan applications, appraisals, housing surveys and even your first month of homeowner’s insurance. These costs can be up to 8 percent of your purchase price.

— What are closing costs?

They are the fees for services, property taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow, document fees, prepaid interest and property taxes.

— Who pays the closing costs?

Closing costs are either paid by the seller or buyer depending on what the buyer or seller negotiates. Both buyer and seller have separate costs associated with the sale.

— What Is Title Insurance, And Why Do I Need It?

Title insurance is an insurance policy that protects you against loss that could result from defects in the title of the property you are buying. The premium is paid only once and is good until the property’s ownership changes. Unlike most types of insurance which protect policyholders from future events, title insurance protects you against defects that could already exist.

— What Does A Home Warranty Cover?

Generally, a home warranty offers a variety of options to cover a home’s appliances and major systems such as air conditioning, heating, electrical and plumbing. Coverage offered varies depending on which warranty company you use.  Home warranties provide peace of mind to buyers.

— What Are The Different Types Of Housing Available To Home Buyers, And What Are The Advantages And Disadvantages Of Each?

A single-family home – refers to a free-standing property that does not share walls with other nearby homes or structures, and that is built from the ground up at the site of its foundation, on its own piece of land. The pros for owning a single-family home include the fact that the owner owns everything : the home itself as well as the land it is on, and as such is able to landscape, remodel or rebuild the home to the extent desired. Possible disadvantages to owning a single-family home may include the fact that the owner is responsible for all repairs and maintenance, as well as any remodeling done to both the interior and exterior. He or she will also likely have fewer amenities than high-density living structures which often provide swimming pools, tennis courts and more as part of homeowners’ association fees charged.

A townhouse – is a home that is attached to one or more other houses, located on a specific property that the townhouse owner also owns. Townhouses can range drastically in size and architecture, including multi-unit structures such as duplexes or triplexes. Advantages to owning a townhouse can include less financial responsibility for exterior maintenance and repair costs, heightened security afforded by a more high-density community and amenities for which the homeowner is not directly responsible (pool, tennis courts, etc.). Disadvantages often include less privacy than with a single-family home, less freedom to alter the home’s exterior and a monthly or yearly homeowners’ association fee.

A condominium, or condo, – is very similar to an apartment in terms of structure and multi-unit design. Often, apartments are converted to condos as the result of changes in complex ownership and management. Condominium owners own only the interior of their dwelling from the walls inward and, just like with an apartment, their home is attached to their neighbors’.  All condominium owners who live in a particular complex share the financial responsibility for maintenance and repairs to the overall property and building exteriors, through payment of a monthly homeowners’ association fee and, if necessary, a special assessment requiring a one-time payment of a predetermined amount. Possible advantages to owning a condo include less individual financial obligation for exterior home repairs and a lower purchase price than a single-family home or townhouse. Disadvantages may include greater difficulty when selling a condo, as compared to single-family dwellings and townhouses, monthly homeowners’ dues, less privacy than with other types of housing and usually a complete lack of freedom to alter the exterior of the home in any way.

A manufactured home, – once typically referred to as a mobile home, is a single-family home that is built at a location other than the land on which it sits. Most manufactured homes are modular in structure, and final assembly occurs on the home site after separate pieces are transported from the manufacturing plant to the homeowner’s property. Advantages to owning a manufactured home may include that it is often a less-expensive means of acquiring a single-family residence, and in the event the owner moves to another property or sells the home, it may be easily transported to another location. Disadvantages include an obvious limitation in architectural options (since the homes are built off-site and then moved) and, often, reduced longevity in the durability of the home.