Business & Merchant

Last Updated on Tuesday, 22 December 2015 19:43

By Roger Dolanch, Broker/Owner

The more you know about the home-buying process, the more money, time and effort you'll save. Here are some questions to help you:

1. Which matters more: being pre-qualified for a mortgage or pre-approved? Make sure you’re pre-approved and have a letter to prove it. Pre-qualification is just an estimate of what the lender thinks you can afford. The pre-approval letter assures you and prospective sellers that you can obtain a mortgage. Without it, they may not consider your offer.

2. True or false? When buying a home "For Sale By Owner" you can't use a Realtor® as your buyer's agent. This is false! Most “FSBO” sellers will accept buyers' agents and may even agree to pay the buyer’s agent compensation.

3. How much should you expect to pay for closing costs? In addition to a down payment, budget an extra 3% to 8% of the purchase price to cover costs at settlement. These usually include the loan origination fee, any loan discounts, title insurance, government recording charges, transfer taxes, an initial deposit for the escrow account, and services that you or the lender pay for. It is also possible in certain circumstances to ask the seller to contribute toward those costs.

4. Does the title insurance you're required to buy in order to get your loan protect you or the lender? The title insurance you're required to purchase in order to secure your loan is for the lender’s protection, not yours. It shields the lender in case a problem with the property's title arises (such as prior claims of ownership, unclear wills, unpaid taxes and easements). Purchase an owner’s policy for very little additional expense and insure yourself in the same way.

5. How much will a home inspection typically cost? Anticipate paying on average between $300 and $400. That fee may vary among inspectors and sometimes on the age, size and construction of the house. When you make an offer on a home, make it contingent on a satisfactory home inspection. In a market where buyers have some advantage over sellers, you may be able to use the inspector's report for further price negotiations if the property needs any significant repairs.

6. How long will a typical home inspection take? Since you will attend the inspection, allow for 1½ to 4 hours, depending on the home inspector and the size and scope of the property. If a radon test is requested, the canister remains in the property for a few days. Keep in mind that it may take a few days for the inspector to complete the written reports.

7. How do you know if you will be required to purchase mortgage insurance? If your down payment on a home is less than 20% of the price, you will be required by your lender to pay for mortgage insurance. This protects the lender if you default on your loan.

8. As a new homeowner, what costs can you deduct from income when you file your federal taxes? In the past you probably took the standard deduction when you filed your federal income taxes. Once you own a home, itemizing may make sense and save you a lot on your tax bill. In the year you buy a house, you can write off discount points paid by you or the seller on your behalf when you took your mortgage! You also deduct the interest on the loan paid during the tax year and the real estate taxes, too. Check with your tax preparer about the status of deducting the mortgage insurance premiums you paid.