Buying a home can be a confusing and intimidating process. From choosing an agent and a lender, to writing a contract, conducting inspections, renegotiating, and closing, there is a lot to know! Read below for answers to these frequently asked questions by buyers.
So where do I start?
The best place to start when beginning the home-buying process is to reach out to your Realtor. Your Realtor will have many valuable resources you can utilize to get started. He/she can refer you to local reputable lenders, explain the process, and help you find a home that both fits your needs and your budget. After speaking with your Realtor, the most important step is to get a pre-approval for a home loan. It’s important to have a pre-approval letter BEFORE you start looking at homes, especially in a fast-paced market, because when you find the home you want to purchase, you want to be able to make an offer right away. Also, the market is very competitive right now, and it’s very unlikely that a seller will consider an offer from a buyer that is not pre-approved.
How is my Realtor paid?
In a typical real estate transaction, Realtor commissions are paid by the seller. Whatever percentage the seller is paying the listing agent to sell his/her home, the listing agent splits with the buying agent. This means that as a buyer, you’re not paying to be represented! There will be some variance between brokerages on what additional fees may be applied, so check with your Realtor to know the exact cost before you sign a buyer agreement.
What is “earnest money”?
“Earnest money,” also called “good faith money,” is a deposit paid by the buyer to the seller’s real estate company or title company to be held in escrow until closing. The primary purpose of this deposit is to show the seller that you are a serious buyer. At closing, the amount of the earnest deposit is deducted from the amount that the buyers owe for the home purchase. In other words, it’s “credited” back to the buyer. An earnest money deposit is usually somewhere around 1% of the purchase price, but it varies depending on the current market.
What are involved in “closing costs”?
The amount of closing costs you pay will depend on the sale price of the home you are purchasing. There are several costs associated with closing on a home, including processing, underwriting, recording fee, and many other things. See the guide below for an example of what these costs will look like.