1. BUYER’S AGENT VS. LISTING AGENT
There are usually two agents involved when you buy a home; the “buyer’s agent,” who represents you, and the “listing agent”, who represents the seller. Duel agency is when there is only one agent representing both parties.
2. FIXED RATE VS. ADJUSTABLE RATE MORTGAGE
Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage (FRM) is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust. An adjustable rate mortgage is a mortgage loan with the interest rate on the note periodically gets adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
3. PRE-APPROVAL LETTER
Before you start looking for a home or apply for a mortgage you should get a pre-approval letter from the bank, which is an estimate of how much they’ll lend you. It will help you determine what you can afford and ensures home sellers that you will be able to get a loan when needed.
4. LISTINGS
Real estate agents often refer to homes for sale as “listings”. A listing is a written contract between a property owner and a real estate broker. It authorizes him/her to perform specified services for the property owner within a specified period.
5. INSPECTION
After you’ve made an offer on a home, you should schedule an inspection. The inspector will go through every nook and cranny, and review things like electrical, plumbing, foundation, walls, heating and air conditioning. An inspection could save you from costly repairs later.
6. APPRAISAL
When you apply for a mortgage, the lender will require an appraisal of the home you want to buy. A licensed appraiser will estimate the home’s value based on comparable homes that have sold in that area and will investigate the property.
7. CONTINGENCIES
When you put in an offer on a home, you can specify certain conditions that must be met before the deal will go through- these are called contingencies.
8. OFFERS
Once you find the right home, you’ll make an offer on the property with the help of your agent or attorney. If the seller counters your offer it’s usually because they want more money or a faster timeline in which to close.
9. CLOSING COSTS
Typically, closing costs will amount to about 2-5% of the purchase price of the home, and that doesn’t include the down payment. Common fees include excise tax, loan-processing costs and title insurance.
10. TITLE INSURANCE
After all negotiations are done and the seller has accepted your offer, you should receive a home title report within a week. Most mortgage lenders require you to pay title insurance as part of the closing costs; title insures search public records to ensure the home seller actually had rights to the title and that there are no liens on the home.