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Buyers FAQ

Buyers Fequently Asked Questions:

Should I buy a house?

Does it make sense economically?

Is my rent cheaper?

Would the saved money get a higher return elsewhere?
Would I invest saved money?

Do I have a large down payment?

Down payments of less than 20% typically require private mortgage insurance.
FHA 3.5% down payment mortgages are still available despite the credit crunch.

Can I afford the added expenses?

Mortgage Payment.
Property taxes.
Homeowner's insurance.
Emergency repair fund.

Is this a good investment?

Is the current real estate market high, low, stable?
Will real estate out perform the market?
Would I invest the money not spent on a house?
How much would I save through mortgage payment tax deduction?

Does it fit my lifestyle?

Like or tolerate yardwork and maintenance?

Kids?

Am I handy?

Am I rooted in the community or am I likely to leave in a few years?

How much can I afford?

Current budget?

Monthly rent. Renter's insurance. Utilities.

Homeowner's budget?

Monthly mortgage payment.
Homeowner's insurance.
Property taxes.
Utilities (could be much higher for an older house).
Emergency fund (it's -10°F and your furnace just died!)
Mortgage tax deduction.

Get pre-approved.

Get your credit report.

Get it free from www.equifax.com, www.experian.com or www.transunion.com.
Correct any mistakes.

Find out your credit score.

Order it from www.equifax.com, www.experian.com or www.transunion.com.
Unlike credit reports, the scores are not free ~$15.
Improve it if necessary.

Try at least three lenders (you want a good rate, right?)

An actual loan commitment letter is best.

A pre-approval letter with lots of caveats isn't worth much.

A pre-qualification letter is worth less (maybe worthless).

Gather your financial information for the lender.

Last year's tax return.
Latest statement of all existing loans.
Latest statement of all current credit card accounts.
Last two years W2s or 1099s.
Last two months of all bank statements.
Last two months pay stubs.
Latest statement of each retirement account.
Evidence of any other assets.

Do I need an agent?

No!

If you're buying a FSBO property they increase costs. They get paid when you close so they want to close, close, close! When you pay too much they get paid more!A good buyer's agent will have a remedy for this.The sooner you close the better for them. The more discerning you are the worse for them.

Maybe

If you're buying a FSBO property they increase costs.

Yes!

If you're buying a "full service" MLS listed property you should have an agent.
But only if you have a buyer agency (BA) agreement.
Without BA "your" agent works for the seller.
With BA the agent must legally represent your best interests.

If an agent shows you a property they're "your" agent for that property.
Unless they specifically agree in writing to disavow any claim to commission or representation as a result of showing you the property (not gonna happen).
If you don't have a BA with them you'll be locked into representation with an agent who is legally obligated to put the interests of the seller above yours.

If you're buying a "flat fee" MLS listing you shouldn't have an agent.
Flat fee sellers are FSBOs who are willing to pay a buyer's agent's commission (but not a listing agent or broker).
If you have no agent the flat fee seller has more room to negotiate a lower price.

If I am working with a real estate buyer's agent, can I call FSBO sellers directly to ask them questions about their property? Or must all communication, including any initial questions, go through the buyer's agent?

There are several ways of looking at this:

If you know there may be FSBO properties you might want to view while searching for your new home, some agents can write into their initial contracts with you that if you identify a FSBO property that you are released from your contractual agreement to pursue the sale without their representation.

Most buyer's agents are willing to represent you in a FSBO sale but expect to receive their commission from the seller at the time of sale.

Some sellers are willing to work with buyer's agents and welcome communication from agents while others prefer to work directly with buyers to avoid paying the agents fees (typically 3% of the sale).

Some sellers may be willing to work with buyer's agents if they bring the buyer but may be less willing to negotiate on price knowing they will need to pay the agent 3% of the sale price - you can expect there may be less wiggle room on the price if you come in with a buyer's agent.

There is nothing that prevents you from making a call to the seller but if you have a contract with a agent, you will need to look at the details of your contract to see what your obligations are regarding whether you are able to view the property or submit an offer without their representation.

Who pays for title insurance?

The short answer is that the seller pays for title insurance (owner's policy of title insurance) to meet the requirement of providing "merchantable title" to the buyer.

The buyer pays for title insurance that their lender requires to prove their status as first mortgage holder on the property being bought.

Per lines 342-345 of the WB-11 Residential Offer to Purchase form:
"Seller shall pay all costs of providing title evidence to Buyer. Buyer shall pay all costs of providing title evidence required by Buyers lender."

My question isn't addressed here. How can I get an answer?

If you have any buyer related questions, please send them to us via email.

Thanks!