Power Mortgage

1 Will I have to pay closing costs?

Yes, when purchasing a home there are closing costs involved that must be paid. 

There are/can be some exceptions where incentives lead to buyers having the closing costs covered by the selling party. In these situations, the closing costs must still be addressed, but are covered due to a specific situation. Buyers can also negotiate the amount paid for closing costs in some situations.

Closing costs are also a factor with refinancing, and other financial situations involving your home equity, like obtaining a home equity line of credit. If you have questions about closing costs, it's best to ask your agent, lender, or seller. 

2 How much are closing costs?

The amount you will pay in closing costs depends on many factors. Typically, buyers should expect to pay anywhere between 2-6% of the total price of their home. This number can change depending on the state you live in and the specific information as it pertains to your purchase. 

3 How much can I afford?

The amount you can afford depends on many factors. Some of which include, your income, your debt to income ratio, the funds you have available for down payment, and many other factors. 

There are calculators that you can use to get a general idea of how much you can afford as you set out to purchase your new home, but the best thing to do if you're serious about a purchase is speak to a mortgage professional. 

4 What are homes in my area selling for?

There are a lot of resources available that can help you answer that question. Sites and apps like Zillow, Trulia, Redfin, and more can help you understand what homes in an area are selling for. 

It's important to understand, however, that the best way to get insight into how much homes are worth at the moment is to speak with a real estate professional. 

5 Are there problems with the house?

This is a very important question that you should make sure to ask if you're going into purchasing a home. Even new construction homes can come with issues. 

It's important to have a clear and comprehensive understanding of the issues the home may have before making your offer. No one wants to purchase a home just to find out you're on the hook for a roof repair or a complete septic system replacement.

6 What costs and fees should I know about?

Closing costs and different inspection fees can often catch buyers off guard who do not anticipate them. Purchasing a home can come with other costs as well, but this all really depends on your situation. 

Purchasing a new construction home? Make sure you understand if there is a lot fee involved, and consider that most new construction homes are listed before any buyer upgrades. Outside of that, brand new homes come with other costs that many buyers don't anticipate, like making sure you have window coverings!

There are other costs to keep an eye out for, as well. In California, for example, a lot of buyers can be caught off guard with the supplemental tax charged after their purchase. The more homework potential buyers can do before jumping in to their purchase, the better. 

7 Should I buy or rent?

It's most often the case that purchasing a home is a better financial decision than renting a home. As, when you are purchasing a home, every time you pay your mortgage you're building toward your equity. When you are renting a home, you're essentially paying a mortgage for someone else, and your rent payments don't go toward anything that gives you long-term value. 

If liquid funds are more important to you, and you don't have the down payment required for a reasonable monthly mortgage payment, then renting could make more sense, as obtaining a mortgage would come with a monthly cost that is not realistic. 

8 How is the neighborhood?

There are websites like area vibes that you can find, they will give you information about crime rates and other data that is important when considering quality of community.

It can also be smart to download the app NextDoor, and search the area you're interested in to see what people who live there are talking about. 

And of course, as always it's a good idea to just go to the area and drive around, explore and see it for yourself. Often times nothing will give you the information you need quite like being there yourself and seeing if it's a good fit for you.

9 How are the schools?

Always an important topic for those with families. Thankfully, there are many resources that can help you  identify the quality of schools in the surrounding area. Apps like Zillow list the school scores in nearby homes and that can be a good way to get a general idea. 

GreatSchools is a good research tool to get information about zoning for schools and school scores. 

10 How much do utilities cost?

There are sites that can help here too: 

Sites like these will help give you an idea, they provide examples based on averages and assumptions, but there are many factors that can change what you may pay. These factors can include the utility company you will have to utilize, if you have solar or not, the type of energy you use (gas, electric, etc) and how much energy you tend to use in your home. 

11 What is an earnest money deposit?

An earnest money deposit is a deposit you put down in "good faith" to show that you're serious about purchasing a home. It's not always a requirement but in situations with heavy competition between buyers it can be a good idea. 

If you're looking into purchasing a new home, for example, and there is a waiting list. In some situations, if a buyer were interested in showing the seller that they were serious, they could get priority on that waiting list by offering an earnest money deposit. 

12 What if my offer is rejected?

Try not to be too discouraged if your first offer isn't accepted, it's often the case that buyers can make many offers before one is taken. 

It's pretty normal for this to happen, especially so in hot real estate markets. Be patient and remember to not fall *too* in love with the idea of each home you look at being "the one." 

There can be times buyers have a lot of liquid assets to offer to sellers, and are willing to go further above asking than you are. It can be frustrating, but it's all a part of the process that is relatively common. 

13 What if the home appraises higher than listing price?

If this happens, you're in a good situation as the buyer. All this will mean is that you have agreed to pay the seller a price for the home that is lower than what the home is actually worth. 

A home being appraised for a higher cost than the selling price when you're in the closing portion of the process will not do anything to stop the process or hold up your transaction. It just means you got a good deal! 

14 What if the home appraises lower than listing price?

This is the situation that isn't as great for buyers. If a home you're trying to purchase appraises lower than the listing price, depending on how you're going about getting your mortgage, there could be challenges. 

For instance, if the home is appraised lower and the seller is not willing to lower the purchase price of the home you could have to increase your down payment to keep the interest rate that was provided for the transaction. 

Why? Lenders have thresholds on how much loan:home funding they will provide, even more so in the case of loans like an FHA mortgage. When the value of the home is decreased, so is the amount of. lending available to you. To make up for the difference, you may be required to pay more of a down payment, to cover the decrease in home value post-appraisal. 

If a situation like this is one that you find yourself in, it's always best to speak with a real estate or mortgage professional to understand the factors involved and make the best possible decision for your situation.