Feb. 13, 2018
If you’re a first-time homebuyer, or even if you’re not, all of the terms and procedures that are involved in purchasing a house can be overwhelming, to say the least. But no fear, the Falls Real Estate team is here to help break down some of that confusion so you can feel secure in your process.
What does it mean to be Pre-Qualified and Pre-Approved for a loan?
Pre-Qualified essentially means, based on a limited amount of criteria, the amount you might expect to be approved for a loan. Remember, this is not a sure-thing, it’s a general idea. Don’t assume that because you are pre-qualified that the lender will 100% issue you the loan.
When getting pre-approved the lender will do an extensive check on your financial background and credit history and be able to tell you the amount you would be approved for in terms of loan. This will let you know what you can afford when searching for a home.
This document spells out the rights and duties of both the buyer and the agent. These essentially work as a “promise” that you and your agent will work together to find your next home. Because your agent works on your behalf for weeks, or maybe even several months, finding and showing houses, facilitating relationships with lenders, negotiating offers and more, this agreement is essentially a promise that the buyer won’t skip out on the agent, go with another agent, and agent B reaps the rewards of all of Agent A’s work.
Don’t worry though. If you feel you’ve been saddled with a bad agent, the buyer may have the right to fire him or her. It should all be laid out in the agreement you signed.
A home won’t be labeled “Sale Pending” until the buyer has removed all contingencies and the sale is essentially a done deal. A deal could still potentially not come together, but the inspections and appraisal have been done, the loan was approved and all signs point to moving ahead.
What does it mean if a house is “Under Contract”?
If a house you are interested in is under contract, it means the sellers have accepted an offer, but the deal has not been fully completed. The deal could be subject to certain contingencies, financing, or inspections. The seller can take back-up offers, but they cannot just walk away from the original contracted buyer.
What is a short sale?
Occasionally you might see a sign in a yard that says “Short Sale.” This means the seller is selling the house for less than what they owe to their lender. Short sales can be delayed because the seller’s bank has to approve the sale in order for it to go through. So if you’re looking for a quick closing process in order to get moved in to your new home, purchasing a short sale could create headaches for you. You might have a harder time negotiating a price because the seller cannot make these decisions themselves, their bank gives the okay.
This is the timeframe that allows buyers an opportunity to arrange or perform inspections on the property they intend to buy. If it doesn’t meet their standards, they can choose to renegotiate or cancel the contract.
It is suggested that you get it all done well before the deadline, that way you have enough time to discuss any issues with your agent.
What happens during a home inspection?
Over the course of several hours, a home inspector will complete a detailed walk-through of the home you want to purchase. During this review, they are examining things from roof to basement, including the foundation, the interior and exterior walls, windows and doors and floors. They will also check major appliances, the HVAC system, as well as take a look at the plumbing and electrical systems. They even go in the attic. They will be documenting everything they find and then give you what should be an unbiassed judgement on the condition of the home. Inspections do more than simply identify issues with a house. They are also a great way for buyers to educate themselves about their new home. At the end of the inspection, the inspector will generally want the buyers to come to the property where he will walk them through the home, teaching them everything from preventative maintenance to how to fix smaller issues themselves after closing.
What is the Appraisal?
The appraisal is a determination of what a house is worth. This number is used when determining how much you can get for a loan, or sell your house for.
So, what the heck is ESCROW?
Escrow is the use of a third party to hold onto something valuable during a transaction. This protects both parties during the deal. The impartial third party hold onto your house or your earnest money for safekeeping to be sure all of the parties involved do what they are supposed to do to complete the transaction, or in other words, they ensure everyone involved holds up their end of the deal.
Wait…back up a second…what is EARNEST MONEY? Earnest money is the funds paid to ensure that you’re serious about your offer. In a slow market, you might only have to pay $500-$1000, but if the seller has a higher demand for their home, you might have to pay a percentage of the offer amount. You can lose your earnest money if you back out of the offer for no valid reason.
There is another type of escrow that deals with funds that are held to make the payments for your property taxes or homeowner’s insurance. Your mortgage lender will collect these funds at the same time as your loan payment and then use the funds to pay the taxes and insurance. That way you you don’t have to worry about setting aside that money throughout the year to get ready for the big bill
A contingency, sometimes known as a condition, can be attached to an offer and included in the contract to purchase a home. It essentially gives an ‘out’ to parties so they can get out of the agreement under certain circumstances. These circumstances must be negotiated between the buyer and seller.
Examples of contingencies a sale might hang upon could include something inspection-related, the appraisal amount, or the sale of their current home.
PMI is Private mortgage insurance. If you put less than 20% down and you take out a loan, PMI is required. PMI protects your lender if you stop making payments. It does not go toward your principle, so it does not build equity in your home.
These are the expenses that normally come from the completion of a real estate transaction and are paid at the time of closing.
These costs may include appraisal and loan origination fees, title insurance, taxes, the home inspection fee etc. They are not part of the cost of the home.
We hope that laying out the definitions of some real estate terminology helps make the process a little less intimidating. If you have any other questions, or are unsure of how to start the process of finding your new home, don’t hesitate to give Falls Real Estate a call and we’ll help you!