Frequently Asked Questions

Frequently Asked Questions

How long does the home buying process take?

Can a home depreciate in value?

Is an older home as good a value as a new home?

What is a broker?

Can I pay my own taxes and insurance?

What is the difference between pre-approval & pre-qualified?

What is title insurance?

How can I avoid private mortgage insurance?

How long does the loan process take?

How is mortgage interest calculated?

Is there a minimum credit score?

What do I do if I receive a tax bill?

 

How long does the home buying process take?

Contract to close is typically 30 days or less in first time home buyer market. How long you find the community and get an offer accepted can be up to 2 months. So from ready to buy to close could be 3 months.

Can a home depreciate in value?

Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate. This is why it’s a great investment. Make sure you carefully consider location and community when choosing a home, it can effect the homes future value greatly.

If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may effect your homes value.

Is an older home as good a value as a new home?

This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.

Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less then older homes. Most new homes will not have any backyard landscaping and some don’t include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10’s of thousands of dollars in landscaping done, which is included in the purchase price.

Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they’re concerned about potential maintenance costs. To mitigate this concern, consider a home warranty.

In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TVs, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident’s tastes and technological whims, unless you plan to invest into remodeling and rewiring.

New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.

As you can see there are advantages and disadvantages to each, but it really comes down to what fits you and what you are looking for in a home.

What is a broker?

A real estate agent who is authorized to open and run his/her own agency.  This usually involves a minimum number of years actively participating as a agent and passing an additional examination. All real estate offices have one principal broker.

Can I pay my own taxes and insurance?

When a loan is originated, the mortgage documents specify the escrow conditions. This has become a standard practice for all mortgages, including FHA, VA and conventional mortgages.  Occasionally on conventional loans, the collection of escrow requirement at closing may be waived if you have a minimum 20% equity position in the property.

How long does the loan process take?

Generally, the loan process takes approximately 30 days from the time your contract has been accepted until you are clear to close (go to settlement).  If you are getting down payment assistance from a government/quasi-government entity, it may be an additional 15 days for loan approval.

What is the difference between pre-approval & pre-qualified?

Pre-qualification means that you MIGHT get a loan for the amount stated to you. That’s based on if all of the information you provided to the bank is accurate and true. This is not as strong as a pre-approval. This is just for informational purposes and is not a certified amount that you can definitely get from a lender.

If you’re pre-approved, it means that you went through an extensive financial background check. This includes looking at your credit history, previous tax returns, and verifying your employment. Most importantly, the lender is willing to give you a loan, basically meaning you’re approved!

The pre-approval equips you with an accurate figure for the maximum amount you can borrow. This provides sellers with more peace of mind because they know that there will not be any problems with the purchase of their home. Therefore, they prefer buyers with the approval.

Without pre-approval, you will likely not begin viewing homes with agents. On top of that, if you submit an offer, the seller is unlikely to accept it. In both cases they would want to know that you are willing to close on the home you’re viewing/made an offer on. In this market only serious players win the bidding war, and pre-approval is a great step to show that you’re ready.

What is title insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.

How can I avoid private mortgage insurance?

The easiest way to avoid PMI is by putting 20% down payment; however, you can also avoid PMI with 5% or 10% for the down payment. The way to accomplish this is via a first and second mortgage combination commonly referred to as 80/10/10 or 80/15/5.

These two methods combine a first mortgage lien for 80% of the home price with a second mortgage lien for either 10% or 15% of the home price leaving the remaining 5% or 10% as the down payment. Because the first lien is at the magical 80% loan-to-value, there is no PMI required, even though a second mortgage is being piggybacked onto the financing which allows for the smaller down payment.

While the second lien terms are not as attractive as first lien rates, the second mortgage is still home mortgage interest and thus deductible as such on your federal tax return where PMI is insurance and offers no deduction.

Additionally, there are mortgage programs that target first time home buyers that also avoid PMI.  Check with one of our preferred lenders or your own to find out more as program offerings change.

How do I calculate mortgage interest?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days

Is there a minimum credit score?

Yes.  Most lenders use a minimum FICO (Fair Isaacs Corporation) score of 300. The maximum is 850.

What do I do if I receive a tax bill?

Many tax authorities will mail an informational copy of the real estate tax statement to the homeowner in addition to your mortgage lender.  However, there are some statements tax authorities do not forward to the mortgage lender, and in special cases will need your assistance in obtaining the bill. If you receive a statement for any of the following, please forward it to your lender.

  • delinquent real estate taxes
  • supplemental or additional real estate taxes
  • special assessments
  • if the tax authority will not honor a bill request from another party.