If you’re about to buy a home, your mind might be swimming with questions about the process, and what it entails. I’m here to help! Below you’ll find answers to some of these homebuyer frequently asked questions that many future homeowners ask.
If you’re looking for a realtor in Lancaster, PA (or surrounding areas), and you have more questions, reach out to me and let’s talk about your journey!
There are advantages to both renting and buying, and the answer to this question depends on your situation. I’m sure you’ve heard that mortgage rates are historically low, and locking in now could end up being great for you financially over time. In addition, while renting relieves you from the cost of home ownership and maintenance, it also doesn’t allow you to build equity in property. With rising home prices and low interest rates, if you plan on living somewhere for several years it may be a good idea to look for a home purchase. If you plan on moving multiple times within the next few years, renting may be a better, more flexible option for you.
Getting a ballpark estimate of the amount of home you can afford before getting a pre-qualification can be a good indication to you whether or not to move forward. There are about a trillion online calculators you can choose from, but this one from Nerdwallet is my favorite to use.
MANY lenders use the 28/36 rule when it comes to figuring out the max amount they can loan out to you. The 28/36 rule is that your principle, interest, taxes, and insurance (PITI) payment is less than 28% of your GROSS (before taxes) income, and when you add the rest of your debt obligations to the PITI, it comes to less than 36% of total debt.
For example, if your gross monthly income totals $4,000, the best mortgage you’re likely to receive would amount to no more than $1,120/month since that’s 28% of your GROSS income. Also, in that case your TOTAL debt (PITI + car payments, credit card debt, alimony, etc) could not exceed $1,440.
Before you buy a home, your priority should be with keeping close tabs on your credit and getting your finances in order. You can pull your credit for free in many different ways and get full reports to help you clean up any issues. The key to getting a great mortgage rate (and saving yourself a ton of money) is having good credit. Also, make sure your taxes are in order as mortgage companies will need 2-3 years of tax returns to verify income and give you an estimate of your buying power.
If you’re planning on buying a home within the next year, now is the best time to SAVE! The more down payment funds you can provide, the more money you’ll save in the long run by avoiding mortgage insurance and getting a better mortgage rate. It’s a great idea to get pre-qualified with a mortgage professional or local bank so you know what you’ll qualify for.
Lastly, you should reach out to a licensed real estate professional to help you through the process of looking for and putting in offers on your new home. If you’re ready to begin that process, I’m ready to help – let’s get in touch!
Getting pre-qualified is an essential part of purchasing a home. The results will let you know what your buying power is, and help you save time by looking for the right homes and give you a better negotiating stance.
To get pre-qualified, you need to gather those important financial documents like W2s, tax returns, and other personal information. From there you can start shopping for different lenders, both local and online. You can also choose to work with a mortgage broker, who can pre-qualify you for different loans and help find you the best loan for your situation.
If you need some mortgage broker recommendations, I’d be happy to assist you!
The short answer is: no. The long answer is that a pre-qualification takes the basic information you provided to the pre-qual service or lender, with a “soft pull” of your credit, and gives you a conditional green light from the lender for a specific loan amount, so you can focus on homes in that price range.
However, when you go actually apply for a mortgage, you’ll be put under much more scrutiny to determine if the same information you provided during your pre-qualification is the *actual* reality of your financial situation. So while a pre-qualification can get you in the door to see a home with a real estate agent, the end goal is to actually be able to purchase the home, so the actual mortgage approval is much more important in the long-run!
Yes. Typically, a pre-qualification is valid for 90 days after being issued. The reason it’s only 90 days is that the bank/lender wants to be able to re-issue the pre-qualification based on the most up-to-date information about your salary, assets, and debts.
You can always get another pre-qualification, and since it’s a “soft pull” on your credit, your credit score will not take the hit.
To start off house hunting on the right foot, you should identify all of the home features you have to have. How many bedrooms? Bathrooms? Style? Location/school district? All of these answers will help craft what you’re looking for.
Once you’ve identified your ideal match, it’s time to start looking! When house hunting, try not to see too many houses in one day. The details may start to blur between houses and you may get overwhelmed with all of the unique details that each home offers.
Be realistic about your purchasing power. That kitchen in a million-dollar home may look stunning, but it might not be something houses in the price range you’re looking typically have.
Also, you’re not just buying a house – you’re buying a location too! Be sure to research the area each home you visit is in. How are the schools? Is the neighborhood safe? Spend time in that area to see if there are the conveniences you need.
The answer to this really depends on the market itself and the level of desire to own that home. Consult with your real estate agent to find out what comparable homes are going for in that area, so that you can put in a competitive offer without overpaying.
An earnest money deposit (EMD) is a sum of money, many times attached to the offer on a home, to prove that the buyer’s offer to purchase the property is made in good faith, and that the buyer is serious. It’s essentially a deposit the buy the home.
An EMD is typically about 1-2% of the home’s purchase price. But depending on the market, this percentage may rise to 5-10% of the purchase price in hot housing markets, or sometimes it’s a fixed amount, say $5,000 or $10,000. Generally speaking, the higher the earnest money amount, the more serious the seller is likely to consider the buyer.
The reason the earnest money deposit gets a seller’s attention is that it protects the seller if the buyer were to walk from the deal outside of the agreed upon contingencies. The seller would then keep the earnest money as damages from the buyer backing out of the deal (again, for situations NOT covered by contingencies).
Once you’ve found the perfect house, it’s time to put an offer in on it! This can be one of the most stressful times of the entire home-buying process. Your agent will help prepare the offer, including the offer you’d like to make as well as any contingencies you may want to include.
If the seller likes your offer, they may accept it right away. Many times, a seller will counter an offer which will then put the ball back into your court to either accept, counter again, or reject completely. This process can go back and forth many times, so it’s best to have great communication with your real estate agent so that nothing falls through the cracks!
No one likes to overpay for something. That’s especially important for the largest financial purchase you’ll make. Overpaying for a home can put you “underwater” quickly, meaning you’ll immediately owe more than the home is worth right off the bat! And trust me, that’s not a good spot to be in.
To get the best deal, it’s paramount to know the market and comparable sales in the area. Your real estate agent will be crucial in this step, as a Comparative Market Analysis (CMA) can give you a great idea how much a home is really worth in the current market. From there, you can make the *right* offer or strategize a way to negotiate to the price you’d pay for the home!
The short answer: it depends. The offer will have corresponding language as to when the seller needs to respond to the offer by. However, the seller does not need to respond at all. Many times this isn’t the case, and an answer can be provided within the time frame written into the offer.
A home inspection is not a requirement to purchase a home. But most times, I HIGHLY recommend it! Think of how complex a home is – you have duct work, plumbing, electrical, foundations, roofing, appliances, heating, cooling, etc…a lot of components that can develop problems. The last thing you want in a new home is to have to deal with a big repair expense right after moving in!
Inspections can help discover problems ranging from major structural issues, to minor quick fixes. With the proper contingencies in place, an inspection can prevent you from buying a home riddled with problems that you may not have known about otherwise.
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