FAQ

Getting pre-approved for a mortgage is the first step of the home buying process. Getting a pre-approval letter from a lender gets the ball rolling in the right direction. Here’s why: First, you need to know how much you can borrow. Knowing how much home you can afford narrows down online home searching to suitable properties, thus no time is wasted considering homes that are not within your budget.

(Pre-approvals also help prevent disappointment caused by falling in love unaffordable homes.) Second, the loan estimate from your lender will show how much money is required for the down payment and closing costs. You may need more time to save up money, liquidate other assets or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.

Finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling their home. Most real estate agents will require a pre-approval before showing homes - this is especially true at the higher end of the real estate market; sellers of luxury homes will only allow pre-screened (and verified) buyers to view their homes.  This is meant to keep out 'Window Shoppers' and protect the seller’s privacy. What’s more, by limiting who enters their home, sellers are given extra security from potential thieves trying to case the home (like identifying security systems, locating expensive artwork or other high-value personal property).

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Most lenders and banks typically require a FICO score of 620 or better. Borrowers with higher credit scores are seen as less risky, often qualifying for more down payment assistance and better interest rates. On the other hand, those with lower scores may need to bring more money to the closing table to offset the lender's risk.

However, my preferred lender, Mike Johnson with Crosscountry Mortgage, can work with credit scores as low as 500. While this is possible, it often requires manual underwriting and may affect other loan criteria. Most borrowers Mike works with have an average credit score of at least 580 and need a 3.5% down payment.

Worried about it hitting your credit? Mike Johnson with Crosscountry Mortgage will pull your credit for your pre-approval with a soft inquiry so it does not hit your credit until you have an accepted offer and well on your way to purchase your home!

Think your credit is too low...? Mike Johnson with Crosscountry Mortgage will do credit simulations and tell you exactly what you need to change in order to get pre-approved.  

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When you start looking for a home loan, you'll likely come across two terms: pre-qualification and pre-approval.

Pre-qualification provides an estimate of the loan amount you might receive, but it's not a guarantee of approval. This initial step involves a discussion with a licensed loan officer to determine your pre-qualification amount. While it gives you an idea of your potential buying power, it doesn't bind the lender to approve your loan.

On the other hand, pre-approval involves a more thorough process. You'll need to complete an application and verify your credit and financial history. Once approved, you'll receive a pre-approval certificate, putting you in a stronger position when making offers on homes. Pre-approval not only speeds up the closing process but also gives you leverage in negotiations. Most listing agents and sellers will not consider your offer unless it is accompanied by a pre-approval. If you're serious about buying a home, seeking pre-approval is highly recommended.

In the past, buyers typically didn't pay their agent when purchasing a home. Usually, two agents were involved in a sale: one representing the seller and the other representing the buyer.

Sellers' agents, also known as listing brokers, charged a fee to market the property, which included advertising expenses like time, photos, ads, and social media marketing. They also listed the property in the local multiple listing service (MLS) for other agents to find.

Buyers' agents, or co-operating agents, were compensated by the listing broker for bringing buyers to the transaction. This meant buyers didn't directly pay their agents.

However, recent changes, like the NAR settlement, have altered this process. Co-operating commissions will no longer be visible on MLS, preventing buyer's agents from prioritizing homes based on commission. This ensures fairness to sellers and encourages more diverse home showings.

As a result, buyer's agents now require an exclusive agency agreement with the buyer before showing homes. This agreement outlines the agent's minimum commission and the exclusive time frame for working together. If the offered co-operating commission is less than the agreed amount, the buyer may need to cover the difference when making an offer. Alternatively, buyers can choose to include the higher commission in their offer, or for a stronger offer, they can opt to pay their buyer agent's commission directly at closing.

Many first-time buyers worry about coming up with a big down payment, but the reality is more flexible than you might think. According to data from the National Association of REALTORS® in late 2022, the average first-time buyer puts down about 6%, while repeat buyers contribute around 17%.

Surprisingly, there are several programs tailored for first-time buyers that don’t require hefty down payments. For instance, the popular FHA loan typically requires only 3.5% down, and with assistance from organizations like IHDA and help from sellers covering closing costs, this can be even lower or sometimes zero.

But what if you don't qualify for these programs and need money for a down payment? You're not alone. In fact, over 28% of buyers used a gift for part of their down payment in 2021. You can receive a gift from a family member or close friend, and in many cases, it can cover up to 100% of the amount.

Additionally, there are special loan programs like VA and USDA loans that allow buyers to purchase with zero down. However, these programs have specific eligibility requirements. VA loans are reserved for former or current military servicemembers, while USDA loans are available to low to middle-income buyers in rural areas designated by the USDA.

Lastly, many potential home buyers mistakenly believe they need a conventional loan with a 20% down payment. However, this is a misconception. Nowadays, most conventional loan programs require only 3% down if the borrower carries private mortgage insurance (PMI).

When you're in the process of buying a home, it's crucial to consult with your loan officer before making significant purchases, such as buying a car or a boat, or taking out additional loans.

Even seemingly small changes, like increasing your credit card debt, moving money between accounts, or increasing your debt-to-income ratio, can impact your pre-approval amount and loan qualification status. It's essential to avoid any actions that could jeopardize your ability to complete the home purchase successfully.

The journey of purchasing a home, from the initial online searches to closing day, typically spans about 8 to 10 weeks. However, once a home is selected and an offer is accepted, the average time to complete the escrow period ranges from 22 to 45 days under normal market conditions.

Market dynamics play a significant role in the pace of home sales. In bustling markets with high sales activity, the process may extend beyond the typical timeframe due to increased demand overwhelming various parties involved.

Well-prepared cash buyers often expedite the process. However, the type of financing also impacts the speed of the transaction. While cash purchases can close as quickly as the title company and attorneys can process the transaction, lender financing may introduce delays due to inspections, appraisals, and other factors.

In summary, understanding the timeline and potential factors influencing it can help buyers navigate the home buying process more effectively.

That is completely up to you!  Some buyers fall in love with the first property they see and place an offer that day while other buyers can look for the right property for months. Through my experience, most buyers make an offer on their dream home within seeing 6 properties. Oftentimes, buyers have been "window shopping" online for a while before they got their pre-approval.  At the end of the day, you will know when it is the right property for you because it "fits".

When you make an offer on a home, the seller's response time can vary. If you're asking for significant price reductions or requesting large amounts of closing costs, the seller might need time to consider your proposal. However, if your offer is too enticing to pass up, it might be accepted immediately.

To avoid uncertainty, it's wise to set a timeframe for the seller to respond. A timeframe of 12-24 hours is commonly recommended. This deadline ensures that you receive a timely response and prevents your offer from being used as leverage against other buyers or entering into a highest and best scenario. By setting this deadline, you create a sense of urgency that can work in your favor during negotiations.

When you choose to work with me, you're gaining an advantage. With a success rate of 90% in offer acceptance, compared to the industry average of 40%, you're in good hands. I invest time in fostering positive relationships with listing agents and asking the right questions to make your offer shine. This means you're less likely to miss out on your dream home.

In the world of real estate, sellers have options when it comes to responding to offers. They can accept or reject outright, but there's also the possibility of negotiation through a counteroffer. If the seller counters your offer, it means they're still interested in working with you. Your agent will help you review the counteroffer and determine if the terms are acceptable. Remember, back-and-forth negotiations are common, and each round brings both parties closer to a mutually beneficial agreement.

If your offer is rejected outright, it's essential to understand why. Your agent will communicate with the seller's representative to gather feedback. This insight allows you to revise your offer with terms that are more appealing to the seller.

Facing rejection without negotiation can be disheartening, but it's not the end of the road. Many buyers ultimately find homes they love even more after experiencing setbacks. Stay positive and trust that the right opportunity is just around the corner.

When you're ready to make an offer on a home, your agent will request earnest money to accompany it. Typically, this deposit is 1% of the purchase price. Earnest money is a gesture of good faith, showing the seller that your offer is serious and genuine. It essentially reserves the home for you and takes it off the market from other potential buyers.

Usually in the form of a cashier's check (or sometimes electronic transfer), the money is deposited into a trust or escrow account for safekeeping. If the transaction completes, the earnest money is applied towards your down payment and closing costs.

However, if the transaction falls through due to unforeseen circumstances, such as failed inspections or financing issues, the earnest money is returned to you. It's essential to discuss with your agent how to protect your earnest money deposit, including through offer contingencies, to ensure you're covered in case the deal doesn't proceed as planned.

When you're buying a home, it's tempting to waive the home inspection to make your offer more attractive to sellers. However, this isn't recommended. Home inspections are crucial for uncovering hidden defects that may not be visible to the naked eye.

While you're not obligated to get a home inspection, it's highly advised. A thorough inspection can reveal issues that could potentially cost you thousands of dollars down the line. From structural concerns to hidden water damage, a good home inspector will leave no stone unturned. This precaution ensures that you're fully aware of any potential issues before committing to one of the biggest investments of your lifetime.

In fact, I believe in the importance of home inspections so much that I require three levels of confirmation buyers are required to complete when choosing to waive this essential service. In essence, home inspections provide peace of mind and protect your investment, making them a crucial aspect of the home buying process.

When it comes to buying or selling a home, understanding the role of an appraisal is crucial. An appraisal serves as an impartial evaluation of a home's current market value, conducted by a certified appraiser.

During a real estate transaction, the appraiser conducts a thorough inspection of the property. Both the lender and the borrower receive a detailed appraisal report outlining the appraiser's assessment of the home's value. This report is essential for documenting the property's worth and providing assurance to the lender that they're making a sound investment by offering a loan.

It's important to note that buyers are typically responsible for covering the cost of the appraisal. This expense is necessary to reassure the lender that the loan they're providing is backed by a property of appropriate value.

During the appraisal process, the appraiser considers various factors to determine the property's value. These factors include conducting market research, performing an onsite inspection, assessing specific property amenities and characteristics, evaluating overall property condition and quality, and comparing the property to similar homes that have recently sold.

Remember, sellers should never initiate the appraisal process themselves. Doing so carries the risk of discovering that the home is worth more than anticipated. This revelation could lead sellers to reconsider the sale, potentially terminating the contract or seeking a higher sale price.

Final walk-throughs aren't mandatory, but they're highly recommended. They offer buyers the opportunity to ensure that nothing has changed since their initial visit to the property. Final walk-throughs should be completed as close to closing as possible.

If repairs were negotiated as part of the offer, the final walk-through allows buyers to confirm that everything has been addressed according to the terms of the contract. It's a crucial step in ensuring that the property is in the expected condition before closing.

When you're ready to move into a new home, there are several factors to consider regarding your current property. If you plan to use the equity from your current home for the down payment on your new one, selling it first is typically the logical step. Another thing to consider is whether your loan pre-approval will be affected by the sale of your current home as some loan programs can require the existing home to be sold in order to purchase a new one. 

However, some buyers explore the option of turning their current home into an investment property by renting it out. This can be a viable strategy, but it's essential to discuss it with your loan officer. They'll assess your risk profile and credit history to determine if securing a loan for a new home while retaining ownership of the old one is feasible.

In busy sellers’ markets, where there's more demand for homes than available inventory, prices tend to rise. Several factors contribute to this demand:

Hot Job Market: When the local job market is booming, it attracts new residents looking for work. This influx of people increases the demand for homes, which drives prices up even before new homes are built.

Lower Interest Rates: When interest rates drop, it becomes more affordable to borrow money. This affordability attracts more buyers, especially first-time homebuyers, who can now afford larger homes with lower monthly payments.

Exciting Events and Growing Communities: Big events or the expansion of communities can also lead to increased demand for homes in those areas. More people want to live where there's action and growth.

Limited New Construction: With fewer new homes being built, existing homes become more valuable. This scarcity in new construction leads to higher prices for existing homes.

Interest Rate Fluctuations: Sometimes, short-term changes in interest rates can influence buyer behavior. A sudden drop in rates might push hesitant buyers to make a purchase, fearing they'll miss out on favorable rates or future price increases.

Oftentimes, a seller's market can result in seller highest & best scenarios, buyer waived home inspections, appraisal gap addendums, as-is clauses, and/or high price offers.

Understanding these factors can help both buyers and sellers navigate the real estate market more effectively. Whether you're considering buying or selling, being informed about market dynamics empowers you to make the best decisions for your situation.

In a buyer's market, home prices drop as demand decreases. Several factors can influence this:

Economic Shifts: When big employers close, leaving many without jobs, it affects the local economy. This can lead to fewer people being able to afford homes, causing prices to fall.

Interest Rates Rise: When borrowing money becomes more expensive due to higher interest rates, fewer people can afford to buy homes. This reduces the number of potential buyers and puts downward pressure on home prices.

Short-Term Opportunities: Temporary drops in interest rates give buyers more purchasing power, making it a good time to buy before prices react to the changes.

High Inventory: When new subdivisions are built, it increases the number of available homes. This can lower prices, especially for older homes that lack modern features.

Impact of Disasters: Natural disasters like earthquakes or flooding can decrease property values in affected areas. This presents an opportunity for buyers to find discounted homes and receive seller-paid closing credits.