The Answers to 4 Common Questions about Buying a HOme | blog.phmc.com

Buying a home for the first time can be one of the most intimidating processes we undergo in life, but it doesn’t have to be that way! We’re here to spread as much knowledge as we possibly can to help your purchase or refinance go as smoothly as possible. We researched some of the questions people searched on Google regarding a mortgage and answered them. Have you heard the saying “there’s no such thing as a stupid question?” It’s true, especially in the mortgage world!

Scroll to find the answers to some of the questions people ask when buying a home 👇

Question 1. Can I pay a home closing cost with a credit card?

No, you cannot pay a mortgage closing cost with your credit card except for up-front costs like an application or appraisal fee. It is important to know that money is due at closing and must be on-hand cash. Typically, they range from 1-5% of the loan amount and cover the underwriting and 3rd party costs like appraisal fees, real estate taxes, and insurance premiums. To find an estimate of what the costs might be, you need know the loan program, home price, estimated down payment, and interest rate. There are many online mortgage calculators to help you get a better understanding of what the closing costs might be. If using a calculator, please be aware that it is an estimate. To get the accurate cost, speak to your mortgage consultant.

Tip: There are certain situations in which home buyers can avoid paying closing costs.

3 Ways to Avoid Closing Costs are 1. Ask about programs without closing costs, like VA loans. 2. Negotiate for seller-paid closing costs 3. Check for local assistance programs. Find this image on blog.phmc.com

  1. Ask for options that offer a lender credit.
  2. Have your real estate agent negotiate seller-paid closing costs.
  3. Check for down payment assistance programs to help pay towards them.
Question 2. Why is earnest money important?

Earnest money is a deposit paid to the seller. It is important because it shows good faith and your seriousness in purchasing the home and guarantees you will follow through with your end of the agreement. The amount is usually calculated in the initial offer and can range from $1,000 to 10% of the purchase price in hot markets. It is held in an escrow account until closing and then refunded to be used towards the purchase price of the home.

Question 3. Is a home appraisal and inspection the same thing?

No, though these terms sound similar, they can often get confused–especially when buying a home for the first time. Let us help break it down for you:

Home Inspection Completed by a third-party inspector Used to notify buyer of any material defects in the property before closing: • Roofing • Flooring • Windows • Plumbing • Electrical Home Appraisal Completed by 3rd party appraiser Required to determine the value of the home The appraiser will do the following: • Take measurements • Note any remodeling that’s been done • Check the general health and safety of the property • Determine the condition of the property (interior + exterior) • Compare the property to others sold in the neighborhood. Find this image on blog.phmc.com

The home inspection:

A home inspection is requested by the home buyer or real estate agent. A qualified home inspector goes to the property to look for material defects. The inspector looks at the major home systems such as

  • Roofing
  • Flooring
  • Windows
  • Plumbing
  • Electrical
  • Mechanicals

If a material defect is found in any of the following, the parties will negotiate what will need to be fixed prior to closing. In short, the inspection is to identify any material defects in the property before closing. If the seller refuses to fix any of the defects, a credit is offered by the seller so the buyer can fix the defects after closing. Beware of “as-is properties!” These sellers are usually unwilling to negotiate repairs.

The appraisal report:

A home appraisal is ordered by the lender. A certified appraiser then goes to the property to determine its value and overall condition.

The appraiser will do the following:

  • Take measurements
  • Note any remodeling that’s been done
  • Determine the condition + safety of the property (interior + exterior)

The property is then compared to similar properties sold in the neighborhood to determine its final value. After the appraisal is complete, the report will be delivered to the lender. In short, the appraisal is needed in order to determine the final value of the home before closing.

Question 4. How does your debt to income ratio affect buying a house?

The debt to income ratio (DTI) is one of the number one hurdles in the home buying process, especially if you have student loan debt. Getting pre qualified, first and foremost, will help you better understand your monthly debt payments compared to your gross monthly income. Higher DTIs can affect your eligibility for certain programs and may even be the reason you are unable to qualify at all. If you are one of the many home buyers who have debt, try looking into FHA loans. This loan type has more relaxed DTI and credit guidelines.

Have more questions? We’ve got answers!

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