Real Estate FAQ

1| What's the first step of the home buying process?

The first step to giving you the edge in the home buying process is to get a Pre-Approval for a mortgage. Knowing how much house you can afford will save you time in the future when searching for your dream home. When it comes to writing an offer, already having a pre-approval will let agents and sellers know you are a ready and willing buyer. When completing your loan application, you’ll need to submit financial documentation including income, assets, and debts. Gathering this before beginning your home search will save you time in the long run. A successful pre-approval can lead to more bargaining power against other buyers and often allows for shorter closing periods.

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

Most loan programs require a FICO score of 640 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower down payment requirement and better interest rate. Contrarily, home buyers 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. Talk with your lender about what you can do to raise your score!

3| How much do I need for a down payment?

Your lender, finances, and the type of mortgage you have will dictate your minimum down payment. But how much do you really need? A down payment is the cash you pay upfront on large purchases and is usually expressed as a percentage of the total price. On a home, a down payment represents your interest and ownership stake on a home. 

If you meet the necessary criteria and the home qualifies, you will not have to bring any money to closing. The traditional 20% down is not necessary with most programs but can increase your chances of getting an accepted offer. The minimum down payment requirement varies on the type of mortgage loan you receive:

FHA loans require as little as 3.5% down. Backed by the Federal Housing Administration, an FHA loan allows for a lower minimum down payment and can often approve more homebuyers with lower credit scores than many conventional loans. 

VA Loans usually do not require a down payment and are only offered to former/current military service members and their surviving spouses. VA Loans are more restrictive throughout the process and may require certain documentation, and must meet VA Loan property requirements.

USDA loans do not require a down payment and are backed by the U.S. Department of Agriculture’s Rural Development Program. This type of loan is specifically for rural and suburban homes. Buyers must also meet certain income limits and restrictions for the program.

Conventional loans supported by Freddy Mac and Fannie Mae, require as little as 3% down. These are not backed by the government and are serviced by private mortgage lenders, banks, and credit unions. Conventional loans often require high credit scores and typically run for 30 years. 

4| What’s a seller’s market?

In sellers’ markets, an increase in demand for homes drives up prices. Buyers are forced to compete with each other, which can result in bidding wars. Prices are continually driven higher by competing offers, often over the initial asking price. Here are some characteristics of a seller’s market:

• Low Inventory - The market goes through periods of time when homeowners are more reluctant to sell. With our current economic state, more people are working from home creating a shift in the desired lifestyle in homes. Additionally, builders stopped building homes due to the cost of lumber, materials, and equipment. Without skilled builders creating homes, this leads to a shortage in inventory and created higher prices on homes to upset the overall cost to build.

• Interest Rates Trending Downward – Improves home affordability, creating more buyer interest, particularly for first-time homebuyers who can afford bigger homes as the cost of money goes lower.

TIPS: For sellers, take time to consider all your offers carefully and assess whether potential buyers are preapproved for a loan. For buyers, understand that time is of the essence! Not only do you need to be patient and not settle for a home you aren’t interested in, but when you find that dream home, ACT FAST. Placing your best foot forward and considering all your options regarding required repairs, inspections, contingencies, and placing a cash offer. 

5| What’s a buyer’s market?

A buyer’s market is when the supply of homes exceeds the demand created by buyers. This gives buyers leverage over sellers with lower prices and sellers compete with each other to attract buyers.  Some characteristics of a buyer’s market include:

• Longer Market Times -  homes often spend a longer time on the market. This often can be a parting chip for buyers when negotiating, especially if sellers need to move quickly.

• Interest rates trending higher – the amount of money the people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential buyers in the market. Home prices drop to meet the level of demand and buyers find better deals.

• Short-term drop in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.

TIPS: For buyers, pay attention to what is happening around you. Keep a close eye on comparable properties, the number of days homes are staying on the market, and what is available in your area. Take your time and utilize your realtor to help negotiate a good price. For sellers, make your home stand out! Make necessary repairs, clean and depersonalize, utilize professional staging offered by the realtor, and price competitively.