BUSINESS & MONEY // Homeownership
Pamela Reed, of Keller Williams Reality, is particularly passionate about helping potential homeowners buy, sell, or invest in a home in Central Arkansas.
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Homeownership
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1. What the first step of the home buying process?
The path to homeownership for each person may differ depending on the individual circumstances. However, purchasing a home is a legal process that most of us will only do once in our lifetime; therefore, I recommend that the first step is finding a real estate agent to help you navigate this process. Real estate agents can help you avoid costly mistakes and advise you of programs and opportunities you may qualify for.
2. How long does it take to buy a home?
Because there are so many factors, such as inventory, financial portfolio, buyer needs, etc., involved with purchasing a home, the time can vary significantly. On average, it takes about five months to buy a home; however, once a buyer has found a home, made an offer, and it has been accepted, it can take 30-60 days to close.
3. What is a seller's market?
Understanding the laws of supply and demand is the best way to understand whether or not you are in a buyer's market or a seller's market since both are contingent upon the inventory. There are plenty of homes in a buyer's market, so a seller must compete with other sellers to get a home sold, sometimes accepting less than the market value. On the other hand, there is very little inventory in a seller's market, and the buyers have to compete with other buyers to get a home, sometimes paying more. Right now, inventory is very low; we are in a seller's market.
The path to homeownership for each person may differ depending on the individual circumstances. However, purchasing a home is a legal process that most of us will only do once in our lifetime; therefore, I recommend that the first step is finding a real estate agent to help you navigate this process. Real estate agents can help you avoid costly mistakes and advise you of programs and opportunities you may qualify for.
2. How long does it take to buy a home?
Because there are so many factors, such as inventory, financial portfolio, buyer needs, etc., involved with purchasing a home, the time can vary significantly. On average, it takes about five months to buy a home; however, once a buyer has found a home, made an offer, and it has been accepted, it can take 30-60 days to close.
3. What is a seller's market?
Understanding the laws of supply and demand is the best way to understand whether or not you are in a buyer's market or a seller's market since both are contingent upon the inventory. There are plenty of homes in a buyer's market, so a seller must compete with other sellers to get a home sold, sometimes accepting less than the market value. On the other hand, there is very little inventory in a seller's market, and the buyers have to compete with other buyers to get a home, sometimes paying more. Right now, inventory is very low; we are in a seller's market.
4. What types of insurances do I need on my home before and once it is bought?
If you get a mortgage, you will be required to have hazard insurance (Homeowners policy) on the home. This policy will cover the cost to rebuild the property, its contents, and loss of use, among other things depending on your needs. It would help if you started shopping insurance companies after you have an accepted offer, but you will not purchase insurance until you are approaching your closing.
5. How much do I have to pay an agent to help me buy a house?
The amount you will pay a real estate agent may vary depending on how the deal is structured, but most buyers who trust a real estate agent to help them with the process will typically pay around 2% of the home's purchase amount. This fee assists with finding a home, writing legal contracts, negotiating a price, and making experience-based recommendations, among other things.
6. When do I pay an agent?
The great thing about paying an agent is that you don't have to have any out-of-pocket costs. Your real estate agent is paid when the closing is complete. To better understand this, let me go into more detail…so, basically closing happens at a title company who, after having done some research, gives you title insurance, which basically says that you and the mortgage holder can guarantee that nobody else can claim the property. There is a fee for title insurance and many other fees associated with buying a home, which you usually see a list of at or just before closing. Your agent fees will be on this list and then included in your closing costs, which are sometimes paid by the seller or by other means.
If you get a mortgage, you will be required to have hazard insurance (Homeowners policy) on the home. This policy will cover the cost to rebuild the property, its contents, and loss of use, among other things depending on your needs. It would help if you started shopping insurance companies after you have an accepted offer, but you will not purchase insurance until you are approaching your closing.
5. How much do I have to pay an agent to help me buy a house?
The amount you will pay a real estate agent may vary depending on how the deal is structured, but most buyers who trust a real estate agent to help them with the process will typically pay around 2% of the home's purchase amount. This fee assists with finding a home, writing legal contracts, negotiating a price, and making experience-based recommendations, among other things.
6. When do I pay an agent?
The great thing about paying an agent is that you don't have to have any out-of-pocket costs. Your real estate agent is paid when the closing is complete. To better understand this, let me go into more detail…so, basically closing happens at a title company who, after having done some research, gives you title insurance, which basically says that you and the mortgage holder can guarantee that nobody else can claim the property. There is a fee for title insurance and many other fees associated with buying a home, which you usually see a list of at or just before closing. Your agent fees will be on this list and then included in your closing costs, which are sometimes paid by the seller or by other means.
7. What kind of credit score do I need to buy a home?
Mortgage lenders have products that can accommodate an individual with a credit score as low as 580, but a more attractive score to lenders is 620 and up. Some lenders have programs that help buyers improve lower credit scores to accomplish their goal of homeownership. Potential buyers should be careful with lenders who offer them large loan amounts of money with extremely high-interest rates. More often than not, these predatory lenders can be found online.
8. How much do I need for a down payment?
Buyers will have different down-payment needs based on the type of loan for which they qualify. In addition, some buyers will need to pay more down or higher interest rates because of a lower credit score. Typically, a buyer will pay 3.5% down for an FHA loan, 5-20% down for a conventional loan, and nothing for VA Loans. In some cases, if the buyer has not put 20% down on a home, they must pay mortgage insurance until they have paid 20% of the loan. Finally, there are programs that first-time homebuyers may qualify for to assist with their down payment.
9. How many homes should I view before buying one?
Have a clear understanding of your needs, wants, and financial position and communicate this to your real estate agent. This will help your real estate agent identify available homes on the market. The use of technology has certainly made the process more user-friendly and efficient by making it possible for buyers to virtually tour a large number of homes before deciding what to view in person. Ideally, a buyer should plan to view 3-7 homes in person.
10. What is earnest money?
It's very rare a for real estate agent to request earnest money these days; however, there are sometimes instances, and it's typically around $500.
Mortgage lenders have products that can accommodate an individual with a credit score as low as 580, but a more attractive score to lenders is 620 and up. Some lenders have programs that help buyers improve lower credit scores to accomplish their goal of homeownership. Potential buyers should be careful with lenders who offer them large loan amounts of money with extremely high-interest rates. More often than not, these predatory lenders can be found online.
8. How much do I need for a down payment?
Buyers will have different down-payment needs based on the type of loan for which they qualify. In addition, some buyers will need to pay more down or higher interest rates because of a lower credit score. Typically, a buyer will pay 3.5% down for an FHA loan, 5-20% down for a conventional loan, and nothing for VA Loans. In some cases, if the buyer has not put 20% down on a home, they must pay mortgage insurance until they have paid 20% of the loan. Finally, there are programs that first-time homebuyers may qualify for to assist with their down payment.
9. How many homes should I view before buying one?
Have a clear understanding of your needs, wants, and financial position and communicate this to your real estate agent. This will help your real estate agent identify available homes on the market. The use of technology has certainly made the process more user-friendly and efficient by making it possible for buyers to virtually tour a large number of homes before deciding what to view in person. Ideally, a buyer should plan to view 3-7 homes in person.
10. What is earnest money?
It's very rare a for real estate agent to request earnest money these days; however, there are sometimes instances, and it's typically around $500.
11. How long can the seller take to respond to my offer?
This varies because the real estate agent can write it in the contract; however, often 2-3 days
12. What if my offer is rejected?
In a situation where an offer is rejected, this is where your real estate agent's negotiating skills are needed if you know you want the house. Your real estate agent can always counter-offer if the seller agent provides details. Typically, rejections come with what the seller "will do" to close the deal.
13. Should I order a home inspection?
Yes, home inspections are a great way to ensure you make a wise investment and avoid a potential money pit.
14. Do I need to do a final walk-through?
Yes, final walk-throughs can be eye-opening since they occur right before closing. Typically, the seller has moved the furniture out in preparation to transfer possession of the home, and you may find that the contract was not clear on the conveyance of an appliance. Or that there was a picture covering up holes in the wall, etc. These things may drastically change your interest in the home or have unexpected move-in costs. Negotiating any final changes will be the responsibility of your real estate agent.
This varies because the real estate agent can write it in the contract; however, often 2-3 days
12. What if my offer is rejected?
In a situation where an offer is rejected, this is where your real estate agent's negotiating skills are needed if you know you want the house. Your real estate agent can always counter-offer if the seller agent provides details. Typically, rejections come with what the seller "will do" to close the deal.
13. Should I order a home inspection?
Yes, home inspections are a great way to ensure you make a wise investment and avoid a potential money pit.
14. Do I need to do a final walk-through?
Yes, final walk-throughs can be eye-opening since they occur right before closing. Typically, the seller has moved the furniture out in preparation to transfer possession of the home, and you may find that the contract was not clear on the conveyance of an appliance. Or that there was a picture covering up holes in the wall, etc. These things may drastically change your interest in the home or have unexpected move-in costs. Negotiating any final changes will be the responsibility of your real estate agent.
