Common Questions
Everyone has questions about the home buying process. Here we try to answer the most frequently asked.
When can I buy?
Where will you be…
Next Thanksgiving?
Next Christmas?
Your next Birthday?
Let’s do the math. Your lease agreement will be our determining factor in figuring out your “Process” time frame. Meaning the number of months left on your lease MINUS “look time” MINUS “contract time” (usually 30-45 days) equals when we start!
What are Closing Costs (CC)?
This is the amount needed to pay the people making the closing happen! The attorney, the lender, the currier, HOA fees, the underwriter, county taxes, etc,etc,etc.
These fees are always negotiated as to who will pay them, the seller OR the buyer. NEVER assume that they are paid exclusively by one party or the other.
Your Itemized Fee Worksheet (IFW) – given at the time of loan application – will give you a line by line/itemized break down of these amounts.
In order to serve you better and because this information is so critical, it is our company policy to have the IFW in your file prior to writing an offer.
NOTE: Most lenders allow for a certain percentage of the closing cost (usually between 3-6%) to be included in the total sales price, as long as the property appraises for that amount.
What is a Itemized Fee Worksheet (IFW)?
Itemized Fee Worksheet (IFW)
A complete line item break down of all the figures and numbers given to you by the lender is called a Itemized Fee Worksheet.
This very important document is relevant to everything from the type of loan you are applying for, to the amount of your monthly payment, to the amount needed the day of closing.
Because of it’s importance, all In-Transition Realty Inc. clients are required to have a IFW in their file PRIOR to looking at homes.
Any of our lenders are happy to provide you with one the same day you apply for your loan.
NOTE: Please keep in mind that the IFW is an estimate at the time of loan application and some figures may change. (For Example the interest rate may go up or down or the sales price reflected on the IFW may be different from that of the actual sales contract).
What is an Offer?
This is the part of the process when we send the sellers an amount, in writing, that we would like to purchase their property for; with all the details. It gets the ball rolling! No agreement is in place at this time – the difference between an “offer” and a “contract”.
In a perfect scenario, the sellers would accept, all parties would be in agreement and we would have what is known as a binding agreement, a contract.
Unfortunately, those situations are few and far between. What happens next is that the seller sends back what is known as a “counter”. Basically, they are offering the buyer an alternative to what the buyer originally offered.
Once all parties have agreed to the entirety of the offer, it now becomes a binding contract with a specific date and time. Congratulations are in order!
NOTE: Please remember that during this time of countering back and forth, there is NO binding agreement and either party may rescind their offer with written notice. ALSO, while you are waiting to hear back from the seller, they have the option/right to consider an offer from another prospective buyer.
What are Pre-Paids (PP)?
PRE-PAIDS (PP)
The day you close on your home, the lender sets up what could be looked at as a savings account for the “escrow” part of your loan payment. Namely your property taxes and hazard insurance and sometimes the HOA fees.
The lender requires that the borrower, the day of closing, puts aside a sufficient amount in this escrow “savings” account to ensure the homeowners insurance and property tax bill are paid annually.
Unfortunately, because this money is attached to your loan and is there to pay your escrow, you do not have access to it.
Note: Pre-paids can also be included as part of any CC contributions by the seller. (For example: If the seller agrees to contribute a total of $5,500.00, the break down could be $3,800.00 towards CC and $1,700.00 towards PP.)
What is Earnest Money (EM)?
When an offer is made on the desired property, the buyer has the opportunity to show the seller their “EARNEST” intent of following through with the transaction in the form of money…thus the name – Earnest Money (EM).
The EM, in the form of a personal check, money order or cashiers check, will be made out to either the selling broker, sometimes referred to as the “buyer’s agent” or the listing broker. Either way, the EM must be turned over to the designated broker at the time the offer is being signed.
However, stipulations in the offer can allow for the EM to be collected when the offer becomes a binding contract OR for the broker holding the EM to deposit it AFTER the offer becomes a binding contract.
Whatever the agreement, the EM is deposited and that amount is shown as a buyer’s credit on the SETTLEMENT STATEMENT (also known as the HUD) the day of closing.
What is a Down Payment?
The down payment is a percentage of the total sales price as required by the buyers particular loan product to be paid the day of closing.
This amount is determined by the type of loan you are obtaining (for example, an FHA loan requires 3.5% of the sales price as a down payment) and of course any additional amount you choose to add to that.
Although DP is due the day of closing, it is verified prior to via bank statements, 401K’s, gifts from a family member,etc. Your knowledge of the amount needed will be discussed at the time your loan application is taken and will be a line item on your Itemized Fee Worksheet (IFW).
DP money can be a gift, but that too must be verified as to its origin (also known as seasoned and sourced). However, it cannot be an unsecured loan.
What is a Contract?
Contract (also known as a Binding Agreement)
The date and time when buyers and sellers agree! After hours, days and sometimes even weeks of negotiating, all parties are in agreement to all the terms offered by both sides.
Initially after an offer becomes a binding agreement, items left to be finalized are the final loan approval, inspections (due diligent period), appraisal and any contingencies that may have been attached to the contract as an EXHIBIT or ADDENDUM or any contingency stated in the special stipulations (for example the buyer’s may have a home to sell).
Note: All time frames and dates stated in the contract are not to be taken as suggestions! Please consider them just as important as the sales price!