Getting pre-approved for a mortgage is the first step of the home buying process. Getting a pre-approval letter from a lender get the ball rolling in the right direction.
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 “Looky Lous” 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).
From start (searching online) to finish (closing escrow), buying a home takes about 10 to 12 weeks. Once a home is selected an the offer is accepted, the average time to complete the escrow period on a home is 30 to 45 days (under normal market conditions). Though, well-prepared home buyers who pay cash have been known to purchase properties faster than that.
Market conditions are a major factor in how fast homes are sold. In hot markets with a lot of sales activity, buying a home may take a little longer than normal. That’s because several parties involved in the transaction get behind when business suddenly picks up. For example, a spike in home sales increases the demand for property appraisals and home inspections, yet there will be no increase in the number of appraisers and inspectors available to do the work. Lender turn-around times for loan underwriting can also slow down. If each party involved in a deal takes a day or two longer to get their work done, the entire process gets extended.
In sellers’ markets, increasing demand for homes drives up prices. Here are some of the drivers of demand:
A buyer’s market is characterized by declining home prices and reduced demand. Several factors may affect long-term and short-term buyer demand, like: Economic disruption – a big employer shuts down operations, laying off their workforce.
A stratified market happens where supply and demand characteristics differ by price point, in the same area (typically by city). For example, home sales for properties above $1.5M may be brisk (seller’s market) while homes under $750k may be sluggish (buyer’s market). This scenario comes along every so often in West Coast cities where international investors – looking to park their money in the United States – buy expensive real estate. At the same time, home sales activity in mid-priced homes could be entirely different.
Home shoppers pay little or no fees to an agent to buy a home.
For most home sales, there are two real estate agents involved in the deal: one that represents the seller and another who represents the buyer.
Listing brokers represent sellers and charge a fee to represent them and market the property. Marketing may include advertising expenses such as radio spots, print ads, television and internet ads. The property will also be placed in the local multiple listing service (MLS), where other agents in the area (and nationally) will be able to search and find the home for sale.
Agents who represent buyers (a.k.a. buyer’s agent) are compensated by the listing broker for bringing home buyers to the table. When the home is sold, the listing broker splits the listing fee with the buyer’s agent. Thus, buyers don’t pay their agents.
Most loan programs require a FICO score of 620 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower the down payment requirement and better interest rate. Conversely, home shoppers with lower credit scores may need to bring more money to the table (or accept a higher interest rate) to offset the lender’s risk.
The national average for down payments is 11%. But that figure includes first time and repeat buyers. Let’s take a closer look.
While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military servicemembers. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).
If the built-up equity in your current home will be applied to the down payment on the new home, naturally the former will need to be sold first.
Some home buyers decide to turn their current home into an investment property, renting it out. In that case, the current home will not need to be sold. However, your loan advisor will still need to evaluate your risk profile and credit history to determine whether making a loan on a new home is feasible while retaining title to the old home.
Buyers often have a short time frame to sell their current home when relocating to a new city because of a job transfer. If you are moving but taking a position with the same employer, check to see if they offer relocation assistance to help offset some of the costs.
That’s up to you! For sure, home shopping today is easier today than ever before. The ability to search for homes online and see pictures, even before setting a foot outside the comfort of your living room, has completely changed the home buying game. Convenience is at an all-time high. But, nothing beats visiting a home to see how it looks and ‘feels’ in person.
When you make an offer on a home, your agent will ask for a check to accompany it (checks are the same as cash, and the deposit is typically 1% to 2% of the purchase price). Earnest money is made in good faith to demonstrate – to the seller – that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you.
The check (or sometimes cash) is deposited in a trust or escrow account for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.
Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your agent about the ways to protect your earnest money deposit and the ways to protect it – such as offer contingencies.
Written offers should stipulate the timeframe in which the seller should respond. Giving them twenty-four hours should be sufficient.
Sellers can flat-out accept or reject an initial offer. But there a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal isn’t dead until it’s dead. So, if a counteroffer is proffered by the seller, you’re still in the game. You and your agent just need to review it determine whether the counteroffer is acceptable. If so, then approving it closes the deal immediately. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual and negotiations are a part of what Realtors do as a matter of routine. Each revision should bring both parties closer together on the terms of the deal.
Yes! Home inspections are required if you plan on financing your home with an FHA or VA loan. For other mortgage programs, inspections are not required. However, home inspections are highly recommended because they can reveal defects in the home that are not easily detected. Home inspections bring peace of mind to one of the biggest investments of a lifetime.
It’s not required, but it’s a darn good idea! Final walk-throughs give buyers a chance to make sure nothing had changed since their first visit. If repairs were requested, as part of the offer, a follow-up visit ensures that everything is squared-away, as expected, per the terms of the contract.
A unit is a self-contained space, be it a house, apartment, or studio. In order for it to be classified as a unit it must have a private bath, private entrance, and a complete private kitchen area. A room is in shared housing. The room is (often) private, but the kitchen, living room, bathrooms, and other common areas are shared. We also have listings we call “efficiencies,” which are typically living spaces with most characteristics of a studio, but with limited cooking facilities. They are categorized as a studio for searching.
Try to tie the household together with common interests, how you all met, that you get along well, perhaps that you have lived together on campus. Reiterate highlights from your resume, e.g. you are responsible, conscientious individuals who are science majors and need a quiet household for serious studying–only if you are, of course!
No credit is better than bad credit. Get a credit report on yourself. You might be surprised at the information you find there.
Landlords need to have social security numbers to run a credit check but actual bank or credit card account numbers are unnecessary. You can make a copy of the latest financial statement and black out the account number for the application packet. You can put “available upon request” on the application and only give your social security number to those landlords seriously considering you as a tenant. Landlords are required to take reasonable steps to safeguard your private information. While they must keep copies of your application if they run a credit check on you, if they do not, you can request they shred or return your application.
Yes, with a 30-day written notice to vacate. We still recommend a month-to-month agreement for students because of its flexibility. Leases can be very expensive to break.
They can with a 30-day written notice to vacate if you are on a month-to-month agreement. If you are on a lease, they cannot. The new owner becomes your new landlord with the same terms and conditions of the original lease
Familiarize yourself with the Security Deposit law. Clean the unit thoroughly and, if possible, have anything damaged during your tenancy fixed before the pre-move out inspection. This inspection gives you the opportunity to correct any areas that the landlord believes are not up to expectations before you vacate. It is usually less expensive for you to take care of it than for them to manage hiring professional cleaners or repair people and charge you. Expect that your idea of clean and their idea will most likely be different. Take photos! It is too late to document the condition when you moved in but you can document the condition when you vacate. Remember for the next rental to complete the Condition of Rental Property Checklist. This is the most important thing you can do to protect your deposit. Be sure to keep copies of all documents pertaining to your rental
California residential tenants cannot be charged for “normal wear and tear”. While the law doesn’t specifically define “normal wear and tear”, this description from Consumer Affairs may provide guidance:
“Since there are not many legal guidelines on this issue, many judges use what they consider a common sense approach. We understand a good way to determine this is to seek the opinion from the manufacturer or dealer of drapes, carpets, appliances, etc. as to their expected lifetime, assuming normal wear and tear. If the item in question needed replacing before that time, you can use that as a guideline to determine the pro rata amount to expect to pay. (Example: an item’s lifetime is estimated to be 10 years. It was 5 years old when the tenants moved in and a year later it needs to be replaced [it’s now 6 years]. If a similar quality replacement item costs $1500, the tenant would be responsible for $600.)”
Your landlord is required by law, to give you a copy of the rental agreement within 15 days of it being executed and once additionally every calendar year if you request it. Mail the landlord a letter requesting a copy of the contract along with the copy of the civil code.
We recommend written agreements, but if you have a verbal agreement, the landlord must still provide these key items to you in writing:
1. Name, telephone number, and street address of manager or owner for serving notice
2. Who to pay the rent to and where
3. How you are to pay rent
A landlord can legally hold all co-tenants responsible for the negative actions of just one, and terminate everyone’s tenancy with the appropriate notice. For example, three co-tenants can be evicted even if only one of them violates the lease or rental agreement.