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What is the difference between being prequalified and preapproved for a loan?
The difference between being prequalified and preapproved is simple:
If you're prequalified it means that you could likely get a loan for the amount stated to you, assuming that all of the information given was accurate and true.
If you're preapproved, it means that you have undergone the extensive financial background check - which includes looking at your credit history, previous tax returns and verifying your employment; now the lender is willing to give you a loan. From there, you are approved, so, they give you a letter that states such and it is valid for approximately 60 days thereafter.
Notwithstanding the above, you will have an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
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Why should I use a real estate agent?
A real estate agent is more than just a "sales person." They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home. Due to the fast changing market, the data on available listings is not 100% accurate. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.
There are two types of agents, "Buyer's Agents" and "Seller's Agents". It used to be common for all parties involved to work for the seller, hence the term "Seller's Agent". Nowadays, you will most often find a different type of agent, the "Buyer's Agent". If you are in the market to buy, it would be advisable to use a Buyer's Agent. They can make recommendations on what terms and prices to offer as well as negotiating a deal with your best interest in mind. If you happen to be working with a Seller's Agent, never disclose to them the top dollar you are willing to pay for any property. Keep it narrowed down only to things that you would tell the seller directly.
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How can I figure out my debt-to-income ratio?
To figure out where you stand on the debt-to-income ratio, you must first understand the meaning of the figure. Most lenders use the ratio 28/36.
The first number, which is also referred to as the front-end ratio, is the percentage of your gross monthly income that you could comfortably afford to spend on your housing payments or mortgage. This figure includes the money you spend on property taxes and insurance as well as the loan payment itself.
The second number, which can also be referred to as the back-end ratio, is the percentage of your gross monthly income that should be spent on all long-term monthly debts combined.
Use the following guidelines to find out where you stand:
- First, figure out your gross monthly income (your income before taxes). To do this, take your gross yearly income and divide it by 12.
- Multiply this figure by 28 percent (.28). The amount you come up with is TYPICALLY the amount you could comfortably afford to spend on your housing payments per month.
- Now, take your gross monthly income (your gross yearly income divided by 12) and multiply it by 36 percent (.36). The figure shown should be the TOTAL amount of money you spend on ALL LONG-TERM DEBTS COMBINED. To get a more accurate mortgage estimate, tally up your monthly bills - which include car payments, credit cards, child support, alimony, etc. - and subtract this amount from the figure you just came up with. However much money is left over is the amount you should truly be spending on your housing payments per month.
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How much money can I borrow to buy a home?
To begin, you'll need to figure out what your gross income is (before taxes) monthly and yearly. To get a quick ballpark figure, take the yearly income of yourself - and your co-purchaser if applicable - and multiply by 2 to 2 1/2. Most people will fall into this category. There are other things to consider, however. If you have a large down payment combined with little to no bills, the lender may believe that you could afford a more expensive home than the ballpark figure allows.
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What is an escrow officer?
An escrow officer - also known as a loan officer - is the person that walks you through the closing process. They are usually employed by the title company that you are working with. They are a neutral third-party, responsible for overseeing the escrow process. They typically perform the title searches, prepare final paperwork, witness the document signings as well as ensure that the transaction is executed properly and legally.
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What is depreciation?
Depreciation is a decline in the value of property due to general wear and tear, or is also known as an annual allowance that helps you recover on your taxes the cost of the property. Property depreciation occurs most commonly with rental or investment property, which allows for certain tax breaks.
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How big is an acre?
An acre is an area of land equal to 43,560 square feet. For visuality purposes, an acre is most often compared to the size of a football field - not counting the two end zones, which are each 30 feet in length. Now try to envision one square mile, which is equal to 640 acres!
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What is equity?
Equity is the financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home.
If you're buying a home and don't have very much money for the down payment, you may want to find out if the seller would be interested in "sweat equity". This would allow you to perform the labor on any needed repairs and maintenence to the home, (such as outside repairs, painting or electrical work) in exchange for credit towards closing costs.
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What is a REALTOR®?
A REALTOR® is an agent or agency that belongs to the local or state board of REALTORS® and is affiliated with the "National Association of REALTORS® (NAR). They follow a strict code of ethics beyond state license laws and also sponsor the Multiple Listing System (MLS), which is used to list houses for sale.
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What is comprehensive homeowners insurance?
Comprehensive is the most expensive type of homeowners insurance; it covers the most potential damages such as fire damage, water damage not caused by flooding (which would fall under your Flood Insurance policy), your personal possessions, personal liability, theft and vandalism. It is usually required that you carry at least a basic hazard insurance policy.
When concerning homeowners insurance, it's important to shop around as soon as possible to avoid being caught in a jam in the event that your insurance company refuses to insure your home.
You have two options concerning comprehensive homeowners insurance: Guaranteed Replacement Cost Coverage & Straight Replacement Cost Coverage. Guaranteed Replacement is not available everywhere, but is recommended if you can afford it as it pays to rebuild your home even if the amount to rebuild exceeds your policy limit. Straight Replacement is a cheaper choice, but it is limited. It will pay to rebuild your house in the event that it is destroyed, however it will only cover costs up to the policy amount - so if you choose this option, make sure to buy enough coverage to rebuild.
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What is the difference between a real estate agent and a real estate broker?
Most states require real estate sales professionals to be licensed by the state, so that they can control education and experience requirements and have a central authority to resolve consumer problems.
The terminology used to identify real estate professionals varies a little from state to state. Brokers are generally required to have more education and experience than real estate salespersons or agents.
The person you normally deal with is a real estate agent or salesperson. The salesperson is licensed by the state, but must work for a broker. All listings are placed in the broker's name, not the salesperson's.
A broker can deal directly with home buyers and sellers, or can have a staff of salespersons or agents working for him or her.
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What is a buyers agent, what does this specifically do for a buyer and who usually pays this "buyers agent"?
On most transactions, there is usually a listing agent and a selling agent. The selling agent is sometimes referred to in media as the buyer's agent, because he works on the buyer's behalf and it easier than explaining each time that the "selling agent" is not the listing agent and is actually the buyer's agent.
However...
There are some agents that market themselves as "buyer's agents," "exclusive buyer's agents," buyer's representatives," and so on. Mostly it is just marketing. At the same time, part of it is because they want to accentuate the reasons a buyer should not go directly to the listing agent when they purchase real estate. This has to do with agency.
See, if a buyer goes directly to the listing agent, they are dealing with an agent that has conflicting responsibilities. Their job is to get a good price for the seller and they may not zealously represent the interests of the buyer. Those who market themselves as "Buyer's Agents" indicate they are only working for the buyer in a real estate transaction.
The commission is still paid by the seller, no matter what they say in their marketing (with extremely rare exceptions). They either get paid directly by the seller or set up the transaction so that the seller provides a "credit" to the buyer for how much the real estate commission is -- then the buyer pays the commission.
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I have to make a choice between an updated home in an older neighborhood or a newer home in a more modern neighborhood. The home in the older neighborhood has almost everything I want and is much larger, but which makes the most sense as an investment?
If your goal is to buy a home for it's resale value and the one you are thinking of buying in the older neighborhood is at the upper end of values for that neighborhood, then it may not be the wisest choice. If it is similar or lower in price to the others, then there should be no problem, because pricing should be considered in relation to the local neighborhood and not compared to homes in other neighborhoods (for the most part)
Plus, is it a neighborhood on the decline, or are others going to be fixing things up, too, so that it is a neighborhood that is improving? It could turn out to be a very good deal as long as you don't "overpay" because of the recent improvements.
Remember that you also buy a home for it's value to you as a "home," and that is something else you should consider. Which neighborhood would you AND your family feel most comfortable in?
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I agreed to buy a house and now I’ve changed my mind. How do I cancel?
This may not be the answer you were expecting...
For the answer to this, you have to look at your contract. The contract is the legal agreement you have made with the seller. Most contracts have certain contingencies where a cancellation is acceptable. To cancel for reasons other than that, there are often consequences and such a decision should not be taken lightly.
Keep in mind that while you have been preparing to close the transaction, the seller has taken his home off the market and may have entered his own contract to purchase a home. This can create a chain of sales and purchases, all depending on you to fulfill your obligation. If you do not fulfill the contract, your decision may affect many more people than just one seller.
For the legal consequences of canceling a contract, you may have to consult an attorney.
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The buyer now wants out of the contract to buy my home. The contract has been signed by both parties. What are my rights, and do I have to keep my home?
When people break contracts, you can't generally force them to go through with the transaction. What you can do, if you can prove damages, is try to recover the damages in court or through arbitration.
You can attempt to talk to the buyers and find out what the problem is and try to resolve it. It may be something easily you can easily resolve, but maybe not.
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My husband and I have already signed a contract to sell our home. However, we have since changed our minds and no longer want to sell. Can we get out of selling our home?
First, look at the contract and see if there are any contingencies that allow you out of the contract.
You can always decide not to sell.
You just don't know exactly what the buyer's reactions are going to be. You don’t know if they will attempt to enforce the contract. You don’t know if there will be legal repercussions. You might want to get an attorney's opinion at some point, since we do not provide legal advice.
If you do cancel, think about ways to soften the blow to the potential buyer who has put up an earnest money deposit, may have already paid for a credit report and appraisal, and may be charged a cancellation fee by the settlement agent. They may have already given notice (if they rent) or sold their own house, too.
If you reimburse them for some of their hard costs, maybe they will not try to enforce the contract.
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Is there a percentage a seller will mark up the price of a home? For example, if the asking price is $114,000 is an initial offer of $95,000 too low?
Although you can always offer whatever you want, yes, $95,000 is generally too low too offer for a home priced at $114,000.
It's like buying a car. You want to dicker with the salesman a little, but there is more room to dicker on a more expensive car than if you were going in and buying the least expensive car.
Sellers usually mark up the price a little because they realize most buyers aren't going to make a full price offer (though in different markets you can get offers ABOVE the listing price). In your example above, you were offering almost 15% below the listing price. They don't mark it up that much, just a few percent.
Before you make an offer, get your Realtor to go over the comparable sales of other similar homes in the same neighborhood. That is the same data the seller looked at when he priced his house, too. Make certain allowance for whether houses are selling briskly or slowly, and make an offer based on that data.
Note: When you look at comparable sales, you don't know for sure if the seller paid closing costs for the buyer or provided some other financing incentive, so keep that in mind.
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If you make an offer on a house and the owner comes back with a counter offer and you agree to it can the owner still change his mind and sell to someone else?
A seller is free to withdraw the counter-offer any time prior to your acceptance of it. The communication method for acceptance is usually described in the contract. If your acceptance was communicated to the seller in the method required by the contract (prior to the seller withdrawing the offer), the seller should honor the contract with you and not entertain other offers.
But people don't always do what they should.
The problem then becomes whether you try to enforce your contract or not, which requires legal advice and expenses. For that, you have to consult an attorney.
Although you could probably technically enforce the contract, you have to reach a decision on whether it makes sense to expend the time and money to do so. Or does it make more sense to realize the seller is unethical and just move on to buy something different?
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Can you negotiate when making an offer on a new home?
Making an offer on new construction is not the same as making an offer on a resale. Most of the time, the margin for profit is so small on new construction (per unit) that there is basically little or no negotiating. You can try, of course, because "everything in real estate is negotiable," but do not expect too much.
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Can you negotiate the price of a bank owned home?
Everything in real estate is negotiable. However, banks are more sophisticated about pricing than they were years ago. So those "Get a great deal on a foreclosure!" days aren't what they used to be. Lowball offers generally don't go very far.
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If the purchase contract states that the seller is paying for the hazard report and a buyer's home warranty, who is responsible actually ordering them?
Probably, you'll both have to agree. But home warranties don't vary that much in price, so the seller shouldn't mind if you order it. The seller will probably want to order the hazard report, assuming that you mean checking for radon gas and things like that.
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New Construction: If a walk-through inspection reveals a problem, but I choose to go through with closing anyway, can I retain a percentage of the down payment (or mortgage amount) - - not to be paid until the repairs are made?
If you want to go through with closing, you will not be able to hold any of your money back or the lender will not fund the loan. You just have to trust that the builder will make the changes, and they normally do.
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What are the terms of the pest inspection? If after a few years you are living in the home, are the sellers responsible if termites are found?
Assuming you had a pest inspection performed when you bought the house, the terms of the guarantee would be with the pest inspection. You will probably find it with your other documents from when you bought the house.
Expecting the seller to be responsible for something a couple of years after the fact is not really sensible. The only way a seller should be liable is if they knew of an infestation, but did not disclose it.
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What should I be aware of that the house inspector should be doing during the inspection of the house I am interested in buying?
The Inspector should be checking the following things:
- Drainage
- Foundation
- Roof & Water Leaks
- Paint
- Plumbing
- Wiring
- Heating
- Fireplace
- Tile
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I am interested in buying a home which the seller is listed "as is." Will a bank require a home inspection before approving a loan? Will a bank approve a loan on a home needing repairs?
A bank doesn't require you to get a home inspection in order to obtain a mortgage. If there are obvious major problems that affect value, the appraiser may note it in the appraisal report. However, their job is not to inspect the home, just to determine value.
Although the bank doesn't require a home inspection, if your purchase contract mentions a termite report, the lender will require that to be performed and pass before you close.
A termite report lists more than pest infestations. It also mentions obvious structural defects, such as wood rot, etc. These are classified into two groups - category 1 and 2. All items in category 1 must be repaired prior to closing. However, the lender does not stipulate who must pay for those repairs.
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When buying a home, if there has been flooding that results in damage and it has not been fixed, must that be disclosed to the buyer? Does this need to be disclosed if 1. The buyer does not ask about flooding. 2. the Buyer does ask about flooding?
Disclosure rules vary from state to state, but most require the seller to disclose any problems he knows about. However, the rules on disclosure vary according to whether the seller is an individual or a bank, and whether they are represented by an agent or not. Rules on disclosure are not as strict for bank-owned properties and FSBO's.
If you received a "Transfer Disclosure Statement" from the seller, then you probably live in a state that requires disclosure. Go back through your documents and see if you have such a form. Whether the buyer asks about flooding should be immaterial - if a seller knows about a problem, they should disclose it.
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Where can I find a Real Estate Agent "Code of Ethics," if there is such a thing?
Some real estate agents are members of the National Association of Realtors, which does have a code of ethics for their 720,000 members. It is located at http://www.realestateabc.com/codeofethics
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