Should I get pre-approved before looking at homes?
Yes, we always recommend pre-approval as the first step when you begin your property search. Meeting with a lender to obtain a pre-approval letter will help establish how much you can afford. Of course, just because you qualify for a mortgage of a certain amount doesn’t mean that you should borrow up to that limit. Many buyers decide that they are comfortable with a mortgage well below the maximum loan amount that they qualify for. This is something you, as a buyer, will have to determine after reviewing your income and debt levels. You should also take into consideration any changes in spending you may anticipate in the future due to planned life changes (i.e. having children or going back to school for an advanced degree).
Another thing to note is that, as part of the pre-approval process, the lender will pull your credit score. This may bring to your attention any credit issues. Sometimes there are issues you may not even been aware of or you thought had been resolved.Finally, a lender will advise you of any home buyer programs that are currently available. There are often fantastic programs for first-time buyers, first responders, doctors, government employees, etc.
Once I have a contract, how long does it take to close on the property?The typical time from a ratified contract, which is the point at which all parties have signed the sales contract, to settlement, is about 30-45 days. 30 days is about how long it takes for a lender to process all of the paperwork associated with the loan and to coordinate closing with the settlement agent. Some lenders can process this paperwork more efficiently and close in 3 weeks or less, if a speedy settlement is needed. If you are buying all cash, the transaction can be completed in under 2 weeks provided there are no title issues.
What is an earnest money deposit?
An earnest money deposit is a payment the buyer puts down after the contract is ratified. This deposit is often called a ‘good faith deposit’ as it shows the seller you are a serious buyer committed to purchasing the home. The deposit is typically held in a trust account by either the settlement company or the buyer’s broker. Deposits are typically 2-3% of the purchase price, but market conditions can affect the size of the deposit amount. In a competitive market with multiple offers, buyers will often put down even larger amounts to improve the appearance of their offer.At closing the deposit amount is deducted from the final amount the buyer must bring to settlement. Note that if a buyer withdraws from a contract outside of a contingency period they could put the earnest money deposit at risk. However, if a buyer voids a contract within a contingency period, the deposit would typically be refunded in full.
What inspections are part of a sales contract?
In order to determine the condition of the property, you may elect to perform a home inspection. This is strongly recommended to any buyer as the home may have defects which are not obvious but may be spotted quite easily by an experienced home inspector. Additionally, the home inspection may bring up issues that require further analysis from a specialist, such as a chimney company or a structural engineer. The home inspection is generally set-up as a contract contingency which gives you a set period of time, such as 7 days, to perform an inspection of the property. By the end of this time period, you would have the option to either: proceed with the purchase as is; negotiate for a credit or repairs; or back out of the contract.In addition to a home inspection, you may also wish to perform one or more of the following inspections- radon, mold, lead based paint, and wood-destroying insect. These are not the only types of inspections available. The kind of inspection you may want to do often depends on any particular concerns you may have about a specific property.
If I buy a condo, do I get to review information about the building in advance of my purchase?Yes, under DC law (similar laws exist in Maryland and Virginia) you will have the opportunity to review a great deal of information about the building. This will include recent financial information, including an auditor’s report, if available. Also included is information on the building’s master insurance policy and if the building is party to any lawsuits. The building’s governing documents will be provided to you as well, which include the Declaration, Bylaws, House Rules and any plans and exhibits. All of these documents are typically provided to you within 10 days of going under contract and you will have a 3-business day period to review the completed package. During the review period, if you are dissatisfied for any reason you are able to void the contract and have your deposit returned to you in full.