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Why should I use a real estate agent?
Although often thought of as just a “sales person,” a real estate agent acts on your behalf throughout the process. Providing advice and guidance, an agent can benefit you with expertise and up-to-date information.

You can work with an agent whether you are a buyer or a seller. A sellers agent represents the seller to market the home and represent the seller in negotiations. A buyer’s agent can help you narrow your search, find a home, and assist in understanding the home buying process and paperwork.

Both buyer’s and seller’s agents are paid a commission of the sale. This is paid by the seller.

What questions should I ask when looking at homes?
Some common questions are: Does anything need to be replaced? What things require ongoing maintenance? Its also helpful to ask about the neighborhood and area. Be sure your questions are answered completely and that you are satisfied with the answers. Writing down some questions ahead of time may be helpful.

How many homes should I see before choosing one?
There isn’t a set number of houses you should see before making a decision. You want to see as many as it takes to feel comfortable with your choice. On average, home buyers see about 6 houses and search for 9 weeks. Be sure to communicate with your broker exactly what you are looking for to avoid wasting your time.

How big is an acre?
An acre is an area of land equal to 43,560 square feet. An acre is most often compared to the size of a football field (57,600 square feet).

How does the lender decide the maximum loan amount that I can afford?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

How much money will I have to come up with to buy a home?
Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money, the down payment and closing costs.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies.

The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price.

Closing costs – which you will pay at closing – average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise.

What is earnest money? How much should I set aside?
Earnest money is a show of good faith. When buyers execute a contract, the contract specifies how much money the buyer is putting up to secure the contract (usually between 1 and 5%). At closing, this money becomes part of the down payment or closing costs. If the offer is not accepted, your money is returned to you.

How are PRE-QUALIFYING and PRE-APPROVAL different?
Pre-qualification is an informal way to see how much you may be able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. This helps you arrive at a ballpark figure of the amount you may have available to spend on a house, without any obligation.

Pre-approval is a lender’s actual commitment to lend to you. It involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

What is a commitment letter?
A commitment letter is a formal offer of a loan by a lender. The letter states the terms under which the lender has agreed to the loan.

I know there are lots of types of mortgages – how do I know which one is best for me?
The most common mortgage is a fixed-rate mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which normally is 30 years. With this kind of mortgage, you will always know what your payment will be. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed rate mortgage. However, your rate can change once or twice a year. There are several government mortgage programs including the Veteran’s Administration’s programs and the Department of Agriculture’s programs. Most people have heard of FHA mortgages. FHA doesn’t actually make loans. Instead, it insures loans to encourage lenders to give mortgages to people who might not otherwise qualify for a loan. Your agent can help you determine which mortgage is right for you.

What can I expect to happen on closing day?
After you present your paid homeowner’s insurance policy, the closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.). The seller will provide proofs of any inspection, warranties, etc.

Once you have reviewed the documentation, you will sign the mortgage. The seller will give you a signed deed.

After you pay the lender’s agent all closing costs, he or she will provide you with a settlement statement of the items for which you have paid. The deed and mortgage are recorded in the Registry of Deeds and you will be the official owner.