1) How much money do I need to put down in order to buy a house?
This is a question I get often with buyers. And the answer is… as little or as much as you want! But let me explain further. When you write an offer on a house, the seller and listing agent will expect a 3 percent deposit with the offer. This is the money that is held in escrow as a deposit on the sale. You get this money back if you cancel your escrow during the contingency period (usually the first 10-17 days). So, you DO need 3 percent of the purchase price in order to buy a home (90% of sellers out there will expect it) In other words, if you write an offer on a house that is $500,000 -you will need to write a check for $15,000. However, you CAN write an offer with no money down (you are financing the entire amount); and if you do, you will get this $15,000 back at the end of escrow, minus the escrow, title, loan and other charges.
Most of my buyers put down less than 20 percent when buying a home. If you qualify for 100 percent financing, and you feel comfortable with the payments, many buyers these days choose to keep their cash and go no money down, especially with interest rates still low.
2) Is it better to go to a mortgage broker for a loan, or to go directly to a bank?
It is usually better to go with a mortgage broker. Many buyers think they will get a better rate and “cut out the middle man” by going directly to their bank, but you usually do not get a better deal this way, for two reasons.
A). The bank can only offer their mortgage rates, not the rates of other banks; so how do you know whether their rates are the lowest? You don’t.
B). Also, the bank offers you the consumer rate on loans and not the wholesale rate (which is the rate that a mortgage broker gets). So a mortgage broker is able to shop at almost 100 different banks to get the best deal for your situation, and because they are a mortgage broker and deal in volume, they can get a better rate than you the consumer would get by walking into a bank. From my experience, it’s a very rare situation when a mortgage broker could not get a better interest rate than the rate a buyer is quoted from his/her bank.
3). How long does a normal escrow take?
A normal escrow period is usually 30 days, but often as long as 45 days. The time period is negotiated between the buyer and seller, for the mutual benefit of each party. Sometimes escrows are as long as three months — it happens sometimes.
4). How do I know that I’m not paying too much for a house?
Well, there are two ways to check to make sure that you are not paying too much for the house. When you make an offer, your buyer’s agent should ALWAYS give you comps. (comparable sales) in the immediate area. You want to make sure that homes of similar size and condition arc selling close to what you are currently paying. You should have this data when you sit down with your agent to write your offer. If the data doesn’t support the purchase price they are asking, then you can write a lower price on the offer and show the listing agent the comps as an explanation. The other way you can check as to whether the house is over-priced is when the bank comes by for their appraisal. Every property that has a loan requires an appraisal from the bank. These appraisals tend to be on the conservative side because the bank is taking the risk by mortgaging the property. If you go with no money down, the bank will be very conservative with the appraisal because they will have no equity in the property. If the bank appraisal doesn’t come in at the price you’re paying, then you have the right to renegotiate the price, or you can cancel the escrow.
5) What if I put down my 3 percent deposit, and then I change my mind or lose my job…can I get my money back?
6) What is the best time of the year to buy a house, and what is the best time of year to sell?
7) How much do all the escrow costs add up to? It is more than $15,000 dollars?
How can I be sure that the seller isn’t lying about what’s wrong with the house? How do I really know that the foundation, plumbing, electrical is ok. What if it might need $50,000 in work soon?
Please contact me for the answers to questions 5-8.