Purchasing a home can be an overwhelming process. It involves many dynamic pieces that can leave a homebuyer feeling bewildered. Isabelle guides her clients through each step of the buying process, offering sound advice along the way. Drawing upon her past experience in Interior Design & Architecture, she gives objective feedback about each property viewed while keeping you focused on your wants and needs.
Please review the following answers to our 7 most frequently asked questions. Our intent is to prepare you to submit a winning offer and knowledge is power. If your question is not answered herein, please do reach out to us for clarity. We love to talk real estate!
1. What is the difference between a Pre-Qualification letter vs. a Pre-Approval letter?
Being pre-qualified does not count for much in the Marin County/San Francisco market. This simply means your mortgage lender has done a cursory screen of your verbal financial information and has provided a rough estimate of what you might be able to afford. It will not help you to purchase your ideal home.
On the other hand, a mortgage pre-approval takes this preliminary loan process a step further. Additional financial information is gathered, including a credit report. You might be asked to provide many of the same documents that will be required to complete the actual loan process, including tax returns, bank statements and employment verification. With a pre-approval letter from your lender, real estate agents and sellers know you are a serious buyer. This pre-approval letter will be shown to sellers when bidding on a property and proves that you already have the backing and the ability to go through with the sale, making you a much more attractive buyer to the seller.
2. How much of a down payment do I need?
If you are paying all-cash, none; because, well, you are paying all-cash, supported by a proof of funds letter. If, like most buyers, you are getting a mortgage, you will bring 20% down payment to the table. Your chosen mortgage bank will fund the remainder 80% at close of escrow (COE). Your mortgage lender will keep you apprised of the numerous new products and options available to you.
3. When am I required to come up with the full down payment?
Once your offer is accepted, you have 3 days to remit your earnest money deposit, which is typically 3% of the selling price in our Bay Area market. We prefer to wire transfer this within 48 hours to the title company of your choosing. This deposit includes a portion of your closing costs and down payment and shows the Seller you are serious and committed to closing the deal. These funds must be liquid and available (i.e., transfer funds/sell stock before making your offer). Make sure you understand what happens to these funds should the deal not go through. Depending upon the circumstances, the earnest money deposit could be forfeited to the seller partially or in totality.
The remainder of the down payment is due at close of escrow (COE), which is typically 30 days from offer acceptance; however remitting sooner than that is a more competitive advantage.
4. How can I determine what my monthly payment will be?
The main components that determine your monthly mortgage payment are principal, interest, taxes and insurance (PITI). Check with your loan officer for more details on your monthly mortgage breakdown. Also, visit your county or city’s tax assessor website to learn more about property taxes.
Don’t forget to figure in HOA dues where applicable.
5. What is “escrow”?
In California, an escrow state, an escrow company acts as a neutral third-party between the Buyer and the Seller holding items of value in the transaction (cash, deeds, bonds, etc.) until certain conditions are met. Your earnest money deposit, for example, does not go directly to the Seller but rather to the escrow company until conditions of the transaction are met (per the “escrow instructions”).
6. What are property disclosures?
By law the seller is required to disclose everything he/she knows about a property which may affect its value (structural damage, leaking roof, etc.). We will obtain these seller disclosures from the listing agent to review once you have found a property on which you are interested in making an offer. Isabelle recommends to her Buyers that we hire our own inspectors to conduct inspections on our behalf.
7. What is a “contingency”?
A contingency is a condition that must be met within a specified timeframe in order for the transaction to go through. The most common types of contingencies are financial and inspection. If the contingency is not met and formally removed, either party may walk away from the deal.
In a highly competitive market where most properties receive multiple offers, it is not uncommon for Buyers to waive all contingencies. These buyers are in a position to make an all-cash offer, can purchase the property even if their loan doesn’t come through or can make up the difference in cash if the property does not appraise for the purchase price.
A non-contingent offer means the buyer accepts the house in its present condition, irrespective of needed repairs. It is crucial to read the seller disclosures and inspection reports when making a non-contingent offer.