Buying a new home can be complicated and overwhelming, especially for those who haven’t gone through the process before. We get a lot of repeat questions about the home-buying process, so we’d like to help by answering some of them here:
- Should I buy a new home or continue renting? Right now, interest rates are exceptionally low, which can actually make it cheaper to buy than rent. When making this decision, consider how long you’ll be living in the location and whether you are ready for additional maintenance and payment responsibilities.
- Do I need to go to the bank before looking at homes? Yes! Speaking with your banker sets you up for home-buying success, helping you:
- Get pre-approval for a loan (this shows the seller you have the financial means to purchase a home)
- Determine how much you can afford
- Plan your budget and narrow your search
- Decide the best financing plan for you and your situation
- Understand what costs are involved (sale price, down payment, prepaid items, escrows, lending fees, etc.)
- What credit score do I need? The higher your credit score, the better your lending terms will be. We recommend a credit score of at least 620, but this really depends on your lender. Be sure to check with your loan officer.
- How much do I need for a down payment? Most lenders require a downpayment between 3 and 5% of the purchase price, but some lenders may require less.
- How much should I offer for a house? At the end of the day, this depends on your judgement and budget. Your realtor’s advice is your best asset here.
- What is an earnest money deposit? Commonly called a good faith deposit, this is a deposit you give to the seller’s real estate company to show that you are serious about purchasing a specific property. The larger the deposit, the more likely the seller will be to accept your purchase offer.
- What is a due diligence fee? This negotiated fee essentially compensates the seller for removing their home from the market while you have inspections done. Buyers typically pay anywhere between $500 and $2000, but the sum can vary based on a number of market conditions.
- Should I buy a new home before selling my current home? There isn’t an absolute answer here. Although it can reduce your stress to have your new home in line before you sell your current home, that’s not always an option. You may be able to negotiate a “rent-back” through which your buyer will let you stay in the home a certain number of days after closing if you pay their mortgage during that time.
- How long does it take to buy a new home? The home-buying process can typically take between 30 and 45 days, but the length of time can vary.
- How do I find a rent-to-own property? These properties are rare (and risky). Most rent-to-own buyers have low credit scores, creating a high risk for the sellers. Therefore, rent-to-own homes typically come with high interest rates and downpayments.
- What is a short sale? It's a sale in which the sale proceeds are less than the seller's debt on the property and the seller can't afford to pay off the debt. It's best to avoid short sales, as they can be time-consuming, complicated, and result in foreclosure.
- How long does my offer last? Your purchase offer can have a “life” anywhere between 12 hours to 3 or 4 days. If a home is newly listed or in high demand, the “life” will be shorter. To learn the life of your offer, check with your realtor.
- What happens after I make an offer? Once you’ve made an offer, the seller may accept, reject, counter, or neglect to respond to your offer. Although offers are rarely rejected, you can come back with another offer if your first is rejected.
- What inspections do I need to have done? Minimally, you need to make your offer contingent upon a home inspection. But you should consider additional inspections, such as pest inspections, foundation inspections, and mold inspections.
- What do I do after my purchase offer is accepted? Once a seller accepts your offer, the next steps are to complete the inspection(s), the formal mortgage application, and any other required paperwork (title, abstract, survey, etc.).
- Are final walk-throughs necessary? Although they’re not required, they’re absolutely necessary. In the weeks that pass by during the purchase process, you never know what could have happened to your new home. It’s best to avoid surprises.
- When is the closing date? The closing date — the day the transaction is completed and you become the legal owner of the home — is often merely a target decided by the buyer and seller. Even after you set this date, your realtor may work with your lender and title agency to adjust the timeline to allow sufficient time to execute the deal.
- Do I really need a realtor to buy a home? Realtors are strongly suggested. They can help with every part of the home-buying process, explain all your options, and represent you throughout the sale.
Looking for a new home in the Wilmington area? Whether you want to settle in Wilmington, Wrightsville Beach, Carolina Beach, or Kure Beach, we’ll give you your best chance at getting a quality home for a good price! Check out the homes for sale in the area, or give our agents a call at 910-395-4100.
