TOP 10 FREQUENTLY ASKED QUESTIONS WHEN Buying A HOME

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Unless you are paying cash for a home, the absolute first thing you need to do is get pre-approved for a mortgage. By doing so, you will know how much home you can afford, what your monthly payments will be, and how much down payment will be required. Looking for a home without a pre-approval is like going to the grocery store without a list ... you end up overbuying or not getting what you want.

On average, most buyers spend a total of 4 months from the time they start looking for a home to the time they receive the keys. This process includes about two months choosing a home, making an offer, and getting under contract. The remaining two months are made up of the due diligence period and closing process (during this time you are finalizing the details of your new home mortgage).

The best way to describe earnest money is that it is similar to putting down a deposit as "good faith" to indicate your offer is legitimate. While there is no set amount as to what the earnest money amount should be, it is recommended that it is at least 1 - 2% of the sales price. Earnest money is normally placed in an escrow account (neutral third party) while the closing process takes place. At closing, these funds are used towards your closing costs or down payment.

Congratulations you found a home you love ... now what? When you submit an offer to buy a home, the owner will either accept it, decline it, or respond with a counteroffer. If your offer is accepted, then you move onto the closing process. If your offer is declined, then you continue your search for another home. If you receive a counteroffer, then you continue the process of accepting, declining, or countering back-and-forth until both parties agree to acceptable terms of the contract. Once all parties agree and have signed the appropriate documents, then the closing process begins by transferring earnest money into the escrow account. During the closing process, you will conduct all necessary due diligence (inspections & discovery of material facts) and finalize the details of your mortgage (submit required documentation, appraisal, underwriting, lock in your rate). After all contingencies have been met and all documentation from all parties (buyer, seller, lender, etc) are ready, then a final walk-thru will normally take place. After an acceptable final walk-thru, then all parties sign their portion of closing documents. You officially own your new home, once all funds have been transferred and the proper documents have been recorded with the county.

The quick answer is yes; however, the circumstance may determine whether or not you receive a refund to your earnest money. The real estate contract will spell out what is deemed as acceptable to cancel a home purchase and receive a full refund of your earnest money. For example, a failed home inspection or no longer being able to qualify for a mortgage would fall under this situation. Simply wanting to cancel and walk away from a home purchase would most likely result in your earnest money not being refunded and may potentially open yourself up to legal consequences.

The escrow company is a neutral third party that handles the exchange of money and facilitates the closing process. An escrow account is used to hold earnest money, receive your down payment (or money, if all cash purchase), receive lender funds, conduct property title searches, and distribute funds to all parties once the closing documents have been satisfied. The escrow company refers to the contract language as instructions in order to remain unbiased between the buyer & seller. 

Although home inspections are not required by law, they are highly recommended in order to uncover any defects or potential hazards in the home you are looking to purchase. Home inspections can be used as a contingency in the contract in order to allow the option to cancel (without penalty) due to defects or material facts that may be deemed unacceptable by the buyer. The cost of a home inspection can vary depending on the home size and components being inspected.

Closing costs are in addition to your down payment (or money, if all cash purchase) and typically average about 3 - 5% of the sales price. This amount encompasses items like fees associated with your loan, escrow/title fees, pre-paid mortgage interest, and prorated property taxes. The day of the month in which your home closes can affect the final amount of your total closing costs.

With the recent rule changes by the National Association of REALTORS®, the way agents are compensated has evolved. Instead of commissions being automatically paid by the seller through the proceeds of the home sale, there are now various options for handling buyer agent compensation.

This really depends on your personal preference and financial situation. In a Buyers market, selling your existing home could take a bit longer, while in contrast to a Sellers market, where selling your existing home can be a very quick process. Both of these are items to consider when making your decision. Here are a few Pros and Cons that might help as well:

PROS

* You do not have to worry about carrying two mortgage payments

* You can avoid the stress of having to buy & sell simultaneously

* You can apply the funds of your existing home sale towards your new home purchase

CONS

* You may incur the added expense of temporary housing and/or storage units

* You may need to move twice if your existing home closes faster than your new home purchase