Homes by Email
Be the first to see new listings as soon as they hit the market!
1. What is a buyer’s market?
A buyer’s market favors the buyer in any real estate transaction. Knowing which market we are currently in will help you manage your expectations.
Currently, it is still a seller’s market. Buyers will usually be paying asking price or close to it, and many properties will go over the listed price.
This may cool off in the coming year as the Federal Reserve raises interest rates. However, if you do wait to buy, you may end up paying the bank what you save in initial purchase price -- due to the higher interest on your loan.
That said, if you do need to sell your place in order to buy a new home, now is the time to get top dollar for your property.
2. Should I use an agent? Can I save money doing it myself?
Granted, I’m obviously biased…but yes, you should use an agent!
Use a professional, if not me, then someone else you trust. Many buyers don’t know that they pay ZERO to work with an agent. The seller pays a commission percentage of the sale price that is split between the agents on either side of the transaction. However some real estate agents are now starting to charge their clients a fee. They are calling it an office/admin. fee. That fee could range from $250 to $600. I do not charge that fee.
So why go it alone? Save yourself the headache, the paperwork, the negotiations, and use a professional who has your back.
3. What is the difference between pre-qualification, pre-approval, and a loan commitment?
Each lender’s rules can very slightly, but essentially:
- Pre-qualification is the least thorough check of your financials. The loan officer does a preliminary check, usually based on what the buyer tells them. Since a pre-qualification is primarily a verbal disclosure, it holds the least negotiating power of the three.
- Pre-Approval is more thorough, as it requires actual documentation and usually a credit check. Nowadays, a pre-approval is pretty much the minimum needed (and most common) if you want your offer to be seriously considered.
- Loan Commitment is the most exhaustive financial background check, as it entails the underwriter approving a loan for a specific amount. While this is more time consuming upfront, it can really give you the edge in negotiations as it essentially removes the loan contingency from your offer. However, it’s also more work for the lender upfront, so not all lenders offer this service.
4. What is an underwriter? Is it different than a loan officer?
Yes. But they do work together.
- The loan officer is the point person for your mortgage loan who gets your financial file organized to submit to their underwriting department.
- The underwriter, or underwriting department, gives the final thumbs up or down based off the “three C’s”: credit, capacity, and collateral.
Here’s a helpful link that explains these more thoroughly: www.freddiemac.com/corporate/au-works/factors.html
5. How do I find a lender?
Most buyers ask their Realtor for a referral. I have a trusted and hard working lender team. The team I recommend is Megastar Financial. Jason Carleton - Kansas City, MegaStar Financial
If you have worked with a certain loan officer before, want to use a referral from a friend, or shop around online, that works too.
And remember, starting the pre-approval process with one lender, doesn’t mean you can’t shop around during escrow for a better rate. Switching lenders is not uncommon, and can be beneficial.
Applying with multiple lenders can be a bit time consuming, but it can save you big money in the long run with lower interest rates and/or more favorable terms.
6. What is escrow exactly?
I’ve heard escrow used as a verb, adjective, and occasionally a curse word...however, it's a noun.
Boiled down, escrow is a neutral third party that holds all the funds until the specified conditions of the purchase contract are met.
The term “in escrow” is basically slang for the waiting process (typically 30 or 45 days) where the buyer gives a deposit, performs any desired inspections, has the home appraised, and obtains a loan. The escrow company is there to make sure any money is in neutral hands while the transaction is pending.
When something “falls out of escrow,” it just means a condition of the purchase wasn’t met. Maybe the seller wouldn’t perform wanted repairs, or perhaps the buyer could not obtain financing. It can happen for a myriad of reasons. It’s my job to make sure that happens as infrequently as possible.
7. How much down payment do I need?
As little as 3.5%. (FHA). 0% for Va, and USDA Loans.
But, the higher the down payment, the better position you’ll be in, for a couple of reasons…
- First, if you come in with 20% or higher you will avoid paying private mortgage insurance (or PMI), which will save you a couple hundred dollars (or more) per month.
- Second, it puts you in a stronger negotiating position. Someone with 20% (or more) down alleviates the seller’s fears of the buyer being able to obtain a loan during escrow.
- Third, it cuts your overall monthly mortgage payment since you have put a larger chunk down towards the principal, and will pay less interest. Why make the banks richer than they already are?
That said, homes are expensive, and not everyone can afford to put 20% down. It is common for buyers to come in with 3.5, 5, or 10% down.
8. Should I get inspections? Which ones?
YES! (That was easy.) I recommend Premier Inspection Services. https://kchomeinspector.com/?gclid=CjwKCAjwo_HdBRBjEiwAiPPXpH0FbGoUreZ1S3PR2g64A4oCyfekMEkE-yDa4lEqaw5VCSflBqHrYxoCjZMQAvD_BwE
Which ones are up to you. But everyone should get a general physical inspection of their desired property. A home is usually a person’s biggest investment, and should be treated accordingly. The home inspector will give you a good overview of the property.
From that overview, we can determine if you should get more detailed inspections (e.g. mold, sewer, foundation, etc.).
9. What if something is wrong with the house after I buy it?
When you close, you will have a home warranty to cover incidentals (like a broken water heater) and a home insurance policy to cover “acts of God” (like weather damage). These will cover you in many cases, but not all.
That’s why inspections are so important. As annoying it is to pay $300 for a specific inspection on a place you don’t even own yet, it is much more annoying to have a $20,000 repair needed because you skimped on inspections.
10. What happens at closing? What are contingencies?
Closing happens at the end of escrow, after all contingencies are removed, and the loan has funded. The three main contingencies are: inspection, appraisal, and loan. This essentially gives the buyer three exits in the home buying process.
a) If the inspections reveal major problems, and a compromise cannot be reached
b) If the home doesn’t appraise at sale value, and an agreement cannot be reached on new terms
c) If the buyer cannot qualify for the loan, due to any change in their financials
However, once we sign the form removing all contingencies (one of the very last steps), we are cleared to close. You will head to the escrow company to sign all the final paperwork, the loan will fund, and then the deed gets recorded with the county the next day.