Questions a Buyer Should Ask About a Property Part II
Whether you’ve found a beautiful property in your price range and you’ve confirmed no major repairs are needed, or if you are still looking, you’ll want to be ready for the financial side of the transaction. If you want to see what other questions you should be asking about properties as a buyer, please read our previous post.
Here’s what to ask your realtor about the financial aspects and closing stages of the home buying process:
Should I Get Pre-Qualified or Pre-Approved?
Pre-qualification is a preliminary estimation of how much you can afford to borrow. Pre-approval carries much more weight because it shows that you’ve taken the time to get the bank’s official approval on a specific borrowing amount. You’ll want to get pre-approved before making an offer on a home unless you are paying all cash, otherwise your offer is not as strong.
What Type of Mortgage Should I Choose?
The two most common types of mortgages are fixed-rate mortgages and adjustable rate mortgages. Each option carries pros and cons, and best choice for you depends on several factors, current market trends an interest rates influence this greatly. Your realtor can tell you which option makes the most sense for your goals, as well as which options you can expect to qualify for.
What Will My Total Monthly Payment Be?
Aside from the purchase price, the most important number to remember is your total monthly payment, including taxes and insurance. Calculating this number will tell you whether or not you can comfortably afford the home. If you haven’t already, you should get preapproved for a mortgage (unless you are planning to pay all cash) where you will be able to know what the top end of what you are able to afford.
When looking at your total payment, you’ll specifically want to see what property insurance and flood insurance are going to cost (which means seeing what flood zone the property is in) in addition to property taxes.
What Happens if the Home Inspection Finds Something Serious?
Once your offer is accepted, the inspection process starts. This involves the seller ensuring there are opportunities for any and all inspections you need.
Often, there will be a few things the inspections will discover – maybe the septic tank is needs to be serviced and pumped. It will be up to you and your Realtor to determine if you want to ask the seller to take care of it before closing or if you would prefer to negotiate a credit so you can pay for the maintenance after closing.
If there are major issues – like the roof needs to be replaced and that wasn’t priced in or the plumbing is cast iron and cemented into the foundation – it’s reasonable to ask for a price reduction, or walk away from the sale completely.
How Much Should I Offer?
This is always a case-by-case basis. The real estate market operates on supply and demand – if there is a lot of demand for a home or if there’s none, it affects what will be seen as an acceptable offer.
At the end of the day, the offer should be based on market conditions and any pending large expenses the home will need. Ask your realtor what would be considered a good offer for this property, and make sure this number still falls in your price range and you will be comfortable with the monthly payments.
How Long Does the Closing Process Typically Take?
If a seller accepts your offer, you’ll begin the closing process. This includes mortgage approval, title checks, home inspection, gathering and signing the required documents, and more. The closing process can take anywhere from 30 days to several months, depending on a host of factors. Your realtor will tell you what kind of time frame to expect, but it’s probably wise to anticipate the process taking at least 45-60 days before the home’s title is officially transferred to you.
What if the Seller Pushes Back?
The whole real estate transaction is a negotiation. There will be times when the seller pushes back on a request. At that time, you have to decide what your priorities are and what are non-negotiables for you. This is where having an experienced Realtor is so valuable – having done thousands of transactions, they have the knowledge of what is reasonable and what isn’t, and can help you navigate this process successfully.
How Much Should I Budget for Closing Costs?
Mortgage closing costs are fees associated with buying a home that are not included in the purchase price. This includes fees for the appraisal, title insurance, and origination of the loan.
Closing costs typically range from 2-5% of the total loan amount, but they vary tremendously. To work these costs into your budget for the potential sale, ask your realtor and mortgage professionals what you can expect to pay, and if it’s worth your time exploring offers from different lenders.
Are There Any First-Time Homebuyer Programs I Qualify For?
First-time homebuyers might have a hard time qualifying for a conventional mortgage loan due to the required down payment or credit score. If you’re in this common dilemma, ask your realtor about first-time homebuyer programs to see if you qualify for any assistance. These programs are offered at the federal, state, and local levels, though some lenders offer discounts for first time buyers. If you skip this step, you might end up paying way more for a down payment or closing costs than you actually need to.
How Much Will I Need in Reserves After Closing?
An extremely common situation for homebuyers is depleting their savings to cover the down payment and closing costs. What about moving expenses or utility bills? Also, whether you’re buying a previously owned home or new construction, repairs are an inevitability. Something will need to be fixed in the near future. While the number varies based on your individual situation, the general recommendation is 6 months of your total monthly payment set aside.
Additionally, it’s important to remember that home maintenance is usually 1-3% of the home’s purchase price per, so it’s important to be aware of those costs as you plan for the future.
If you have any other questions about buying a home, the Kern Team is happy to help. When you’re ready to start house hunting, we’ll make sure you know exactly what to ask home sellers about their properties, so you can get all the information you need as quickly as possible.
Give us a call today, and we’ll guide you through a smooth and efficient home buying journey.
