So You’re Ready to Invest in Real Estate… What’s Next? 6 F.A.Q.s

1.       Question: I’m ready to purchase my 1^st home… What do I need to do first?
 

 

Answer: One of the most important steps in the home buying process is first determining how much house you can afford and whether or not a lender based on your current credit score and financial situation is willing to give you a loan to purchase the house. Pre-qualification by a lender also helps your Real Estate agent to know what price point to send you homes in as well as the time frame you should expect to be moving in. It won’t do any good to waste some poor agent’s time and gas if you are not even sure you qualify for a mortgage loan. If you just like looking at homes most agents offer online virtual tours you can watch from a tablet, smart phone or computer or you can check the newspapers and local media for open house schedules where certain homes are held open for a few hours on the weekend to allow potential buyers to take a free tour.

 

 

2.       Question: What type of credit score do I need to have in order to get pre-approved for a mortgage loan?

Answer: The majority of mortgage lenders require consumers to have a Fico credit score of 640 or higher. Some lenders will still work with consumers who have at least a 620 or higher. Other larger lender institutions like Wells Fargo have loan programs that only require a credit score of at least 580. While lower credit scores may be accepted in some cases, keep in mind that there may be overlays on the loan. Since your mortgage is sold on the secondary market almost immediately…These investors like Fannie Mae or Freddie Mac will also demand that the borrower/buyer meet certain loan underwriting standards. While a 580 credit score may get you a mortgage loan, you may have stipulations like having to pay 20% down or keep a certain amount of taxes, mortgage insurance, interest and principal house payment in reserves.

 

3.       Question: I was pre-approved for a mortgage. How much money will I need out of pocket to close on my new home?

 

Answer: Closing costs in North Carolina average around $3400-$4000 This costs includes but is not limited to; loan application fee, loan origination fees, credit report, appraisal, inspection, document prep, closing attorney etc. In addition to that Conventional loans often require at least 5% of the purchase price paid down, while FHA financing only requires at least 3.5% of the purchase price of the home to be paid as the down payment. On a $130,000 home that could total up to $8000.

 

4.       Question: If I don’t have $8000 in down payment and closing costs…Are there any programs     or grants I can use to get the money?

Answer: The state of North Carolina has an organization called NCHFA (North Carolina Housing Financing Agency) that will assist qualified borrowers/buyers with up to $8000 in down payment assistance. Another statewide organization, Homes4NC has a program  where qualified borrowers can receive a grant for up to $2000 to help with closing costs. The City of Raleigh has a program offering $20,000 to qualified buyers to help with down payment and closing cost. There are programs available, check with your agent or lender on financing assistance options best suited to your need.

 

5.       Question: Why should I use a buyer’s agent to help me purchase Real Estate?

 

 A Buyers Agent’s commission is paid by the seller at closing. If you have not agreed to a verbal or written Buyer’s Agency Agreement the Agent showing you the home is legally working as a sub-agent of the seller. That means that they are only allowed to disclose material facts. They are working in the best interest of the seller instead of the buyer. When you hire a Buyers’ Agent…(this can be verbal up until the time you decide to put in an offer) they are there to promote your best interest during the deal. They can research the property and neighborhood, turning it upside down to help you make an informed decision on your purchase.  Your Buyers Agent will try to gain every advantage on your behalf to give you leverage in negotiating a fair price.

 

 Your Buyer’s Agent can offer you many other valuable services like;

 Provide access to new listings as they come on the market

 Provide a market analysis on any property you’re interested in to verify its value

 Disclose all material facts pertaining to the property

 Disclose potential environmental concerns like lead based paint and radon

 Assist you with loan approval

 Thoroughly explain all contracts, addendums and property condition reports

 Write up all offers and contracts on your behalf,

 Line up professional services (lender, closing attorney, inspector, appraiser, painter, plumber etc.)

 Be a problem solver for you during the transaction

 Act as a buffer between you and the seller

 

6.       Question: I have been pre-qualified for a mortgage, I have saved funds for down payment and closing cost (or I have a program to get the funds from) I have found a property and I’m ready to make an offer. What is the next step?

Answer: Once your offer has been accepted the due diligence process starts. During the due diligence process you will make your final loan application as well as perform a variety of inspections and appraisal on the property to make sure it is a sound investment. If before the due diligence period is up ad you and your agent discover ANYTHING about the property you don’t like…you can cancel the contract. If everything is suitable and you decide to move forward you will begin to make preparations to close on the property.

Live Links: Working with Real Estate Agent's brochure

Q&A on Offer and Acceptance via NCREC

Working with Real Estate Agents Brochure via NCREC

Q&A on Home Inspections

Q&A on Real Estate Closings