12 Common Real Estate Questions That Buyers Ask


Am I ready to buy?

Before you begin the home search process, it is essential to ask yourself if you are financially ready to own a home. For some, renting might be a more cost-effective and financially savvy decision. For others, it will make far more sense to own a home vs. rent. If the following applies to you, you may be in a strong position to buy a home:

  • You’ve been continuously employed for at least 2 years
  • Your current income is reliable and consistent
  • You pay your bills on time and do not have considerable credit card debt
  • You don’t have multiple outstanding long-term debts (such as several car loans)
  • You have set aside funds for a down payment (or qualify for a zero down loan through VA or USDA programs)
  • You can afford to pay the principal, interest, taxes, and insurance on a home

Is there a tax benefit to buying a home?

In short: yes. If you plan on obtaining a mortgage, the interest on that mortgage is usually tax-deductible. Local real estate taxes may also be tax-deductible on your federal return. It never hurts to read up and makes sure you have the latest information, which can be found on the IRS website. Better yet, call your accountant and ask for up-to-date information specific to your city and state.

Is there a difference between getting pre-qualified and pre-approved?

Yes. Although some may use these terms interchangeably, there are several differences:

Pre-qualifications: Getting pre-qualified for a mortgage will tell you how much you *may* qualify to borrow. If you are hoping to purchase a home for $450,000 but are unsure if you can afford it, getting pre-qualified will give you a sense as to whether you can or cannot afford the home. Homebuyers can go online and complete a pre-qualification on their own. It is important to note that pre-qualifications not involve verifying any financial information about you. If you want to know for sure how much you can borrow, getting a pre-approval is a better bet.

Pre-approvals: Getting pre-approved is a far better option when determining if you will qualify for a mortgage. First, pre-approvals involve submitting several financial documents to your lender like bank statements. They also take into consideration your actual credit score. Thus pre-approvals are a stronger indicator – to real estate agents and home sellers – that you are ready and able to purchase a home. Plus, you and your real estate agent to know how much home you can afford to buy so that you can focus on viewing homes that are within reach.

What does a real estate agent do for a buyer?

A real estate agent has several duties when helping a client buy a home, plus a lot of “behind the scenes” activities of which buyers may never know. At the beginning of the home buying process, your real estate agent can put you in touch with a trusted mortgage lender so that you can get a mortgage pre-approval. After you have been pre-approved, your real estate agent will have a conversation with you to learn more about what you hope to find in a home. Price and location are typically the two biggest drivers of a buyer’s interest in a given property.

Next, the agent research homes that are currently for sale in the area where you wish to move and will schedule tours at the homes you want to see. If you decide to put in an offer, your real estate agent will negotiate it, which can involve a lot of back-and-forth communication. If your offer is accepted, you will need to order an appraisal and home inspection.

The appraisal is required by a lender to make sure the home’s value is enough to serve as collateral to back the loan. The inspection ensures that the house doesn’t have any major issues (such as a leaking roof or faulty plumbing). Your lender will order the appraisal. Your real estate agent will help you pick a home inspector. If any problems with the house are identified during the home inspection, your real estate agent will negotiate with the seller to repair them or provide some kind of compensation to you.

Throughout the home buying process, your real estate agent will serve as the primary liaison between you and the listing agent and will work hard to make the process is as smooth as possible. This is just a broad overview; there are many other details that a real estate agent will manage when negotiating a real estate transaction.

As a buyer, do I have to pay to work with a real estate agent?

Nope! Realtors get paid a commission off of the home’s sales price, which is paid by the seller. The commission rate is typically 1-2 percent of the home’s final sales price. Then the listing agent splits the commission with the buyer’s agent (usually pretty close to 50/50).

If I don’t have to pay a commission, what fees are involved in purchasing a home?

Buyers can expect closing costs to be about 2 to 3 percent of the home’s sales price. There are some fees you will only have to pay once and others that will be recurring.

What kind of credit score do I need to buy a home?

Credit score requirements vary depending on mortgage program guidelines. Most loan programs require a credit score be 620 or higher. If your credit score is lower than 620, you may still be eligible for certain loan programs that come with a higher interest rate. Higher interest rates offset the mortgage lender’s risk; buyers with lower credit scores are shown – statistically – to be riskier borrowers. However, a lower interest rate might be available if you can come up with a higher down payment.

Can I offer less than the asking price?

If you want to offer less than the full asking price of a home, knocking off a few percent from the list price usually won’t scare too many sellers away. If you’re thinking about a lowball offer, be very careful. Work with your agent to research the market and make sure you’re not putting in an offer that will not only be rejected, but will irritate the sellers to the point that they will no longer negotiate with you. If the home is listed for $700,000, but most of the homes in the area that are similar have sold for $650,000, you are probably safe to put in a lower offer than the $700,000 asking price. If the sellers refuse your offer and you still want the house, you’ll have to get closer to the asking price to make the deal happen. If the home has been sitting on the market for quite some time, and the sellers are eager to move, you can consider that data point, too.

What are lender fees?

When a bank or financial institution processes and funds a loan, there are several fees involved, including application fees, attorney fees, recording fees, underwriting fees, and more. Although this will vary case-by-case, the costs will typically amount to about one percent of the mortgage amount. So, if you are taking a mortgage for a $100,000 home, you may pay $1,000 in lender fees. As mentioned, this will vary, so it is best to discuss exactly how much you will be expected to pay when you meet with your mortgage lender.

What is the standard down payment amount?

Your down payment will depend on the loan program for which you are approved. In the old days, the standard down payment was 20 percent of the home’s purchase price. Today, many loan programs do not require 20 percent down. In fact, if you are buying a home for the first time, you might only be required to put down 3 to 5 percent of the home’s purchase price. For example, FHA loans only require a 3.5 percent down payment. What’s more, some loan programs allow family members to contribute to the down payment, which is considered a “gift.”

VA loans (which only apply to former and current military service members) and USDA loans don’t require a down payment at all. USDA loans are only available to buyers in USDA-eligible rural areas.

What is a home inspection (and should I get one?)

A home inspection involves hiring a certified home inspection to review the home’s HVAC system, plumbing, electrical, roof, attic, floors, windows, doors, foundation, basement, and structural components. They will then provide a written report that states what needs repair (if anything at all).
I strongly advise getting a home inspection. Although a home may seem perfectly intact, there could be problems brewing under the surface that should be reviewed by a professional home inspector. If there are several problems in the house that need fixing, the buyer’s agent can negotiate for the seller pay (in part or in full) for the repairs before you close on the home.

Is a final walk-through necessary?

Although a final walk-through isn’t completely necessary, a good agent will recommend it and schedule one for you. A final walk through gives you the opportunity to make sure that and and all repairs you requested are complete. You also want to make sure that new issues haven’t turned up (leaks, etc.) so that you can move in after the closing without a hitch.

Determining the Down Payment Needed

Simply put, the more money you put toward a down payment, the bigger your equity position in your new home, resulting in a lower monthly mortgage payment. Depending on the type of loan you take out, larger down payment could help you avoid mandatory mortgage insurance (an insurance premium tacked on to your monthly mortgage payment to protect lenders should the loan go into default). Here are some loan programs and their respective down payment requirements:

  • FHA Loans: 3.5%
  • VA Loans: 0%
  • USDA Loans: 0%
  • Conventional 97 (Fannie Mae): 3%
  • Home Ready (Fannie Mae): 3%
  • Home Possible (Freddie Mac): 3 to 5%



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