This week we are answering some frequently asked questions. Here are four of the more popular questions we get.
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Question: When you are trying to buy a house, what you should not do?
Answer: Three things... 1) Do not cause income to go down. This will negatively impact your buying power, meaning you will not get approved for as high priced of a house. Do whatever you can to not change this. Don't work fewer hours if you are hourly. If you are self employed, do not have your expenses go up or your revenue to go down. Your income is based on your net revenue. 2) Debt to go up. Don't open any new credit cards, don't buy a new car or lease anything. Don't do anything to cause to your required monthly payments to go up. This includes carrying a higher balance on your credit cards having your monthly credit card minimums go up. 3) Anything to change your credit score, specifically letting your credit score go down. This includes making late payments or maxing out credits that weren't maxed before.
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Question: How long does it take to get a pre-approval?
Answer: It depends on the buyer and how prepared they are. For a pre-qualification (the step before a pre-approval), a lender will ask questions like how much money you make and they will run your credit score to understand how much you are required to pay out and how good you are at paying your bills. During the pre-approval process, the lender will ask for copies of documents (pay stubs, bank statements, tax returns, etc). Based on this information the lender will complete the pre-approval process. How quickly a pre-approval is completed really depends on how quickly you can provide the lender with the requested documents. It can happen in a couple of hours or a couple of weeks. It really depends on you.
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Question: What is an escrow deposit?
Answer: Like when you go to buy a larger item where you put a deposit down at a yard sale or to place something on layaway. An escrow deposit is you saying you want to buy this home and you are willing to put a deposit down for this purchase. This deposit is made after the contract (your offer) is accepted by the seller. The deposit is typically $1,000 and $15,000 depending on the cost of the home and the type of loan being used. It is usually 1-2% of the cost of the home. The escrow is applied to your downpayment. For certain types of loans it can be used towards closing costs or refunded back to the buyer at close. The deposit itself is made in the form of a check or a wire transfer. Here in Orlando, Florida we typically have the deposit held by the title company. It just makes the purchase process easier. Typically the buyer has three days to make the deposit after the last signature/initials have been applied to the accepted contract. When it is sent it, make sure to note which property it is for and get a receipt. Other phrases used for an escrow deposit are "good faith deposit" or "earnest money deposit" or EMD.
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Question: Is it worth having a home warranty?
Answer: This is up to the individual and the house. A home warranty will typically cost between $500 and $1,000 depending on the coverage and how long the coverage lasts. If you are buying a house with older appliances or older air conditioning unit, it may make sense to get the home warranty. You can also get coverage on pool equipment. The nice thing about a home warranty is that if there are any issues, you can pay a service fee (about $75) and they send a technician out to address the issue. If they can't fix it the home warranty covers for the item to be replaced at no additional charge. This does not cover regular maintenance. Also note you cannot pick who will do the service work. Additionally, it is their goal to fix the item and only if it is irreparable will they replace it. This is definitely worth considering if you don't have the money to replace something if it breaks. A home warranty can be purchased at the time of close.
We hope this is helpful. If you have a question about buying (or selling) a house, send them to us to answer.