Here are answers to some of the
most frequently asked real estate questions
received by our office. The answers are general
in nature, and are not meant to serve as legal
advise.
Q. Should I get pre-approved for a mortgage
before I start my home search?
A. Yes. Before you start your home search, you
should know both how much you can afford to
spend and that you’ll be able to get a mortgage
for up to the right amount. Most lenders will
issue a pre-approval free of charge.
Q. As a buyer, does the real estate agent
showing me houses work for me or the seller?
A. The real estate agent works for the seller,
unless you sign an agreement in which the agent
agrees to work for you, as a buyer’s agent. It’s
possible for the agent to work for both buyer
and seller. This is called dual agency, and
requires permission from both buyer and seller.
Q. Does the condition of a property or its
location determine its value?
A. The value of a property is made up of several
components. Arguably, the most important
component is the location of the property, hence
the phrase “Location, location, location.” When
it comes to choosing location or condition,
location is usually the most important factor.
Remember, you can fix a house, but you can’t
change the neighborhood.
Q. Is it necessary to have a house inspected
before buying it?
A. It’s normally not a requirement, but it is
smart to have a house inspected before buying
it. Most inspections check for a house’s
structural soundness, including items such as
the roof, walls, foundation, and mechanicals
(electric panel, furnace, etc.). Some
inspections will include a pest inspection for
insects such as termites, cockroaches, and
carpenter ants. It’s wise to have both a home
and pest inspection before making the purchase.
Q. What is PMI?
A. PMI stands for Private Mortgage Insurance.
PMI is normally required by lenders when there’s
less than 20% equity in a house. For example,
let’s say the market value is $200,000.00, and
you put down $20,000.00. There would only be 10%
equity, so PMI would likely be required. PMI can
be dropped once there’s 20% equity. It is
normally paid on a monthly basis, and is
included in your mortgage payment.
Q. What are escrows?
A. Most lenders require that when you make your
monthly mortgage payment, you include amounts to
pay your real estate taxes and homeowner’s
insurance. The bank will make the disbursements
for both the taxes (normally quarterly, and the
homeowner’s insurance (normally once a year). In
some instances, you can have the escrows waived,
which means you will be responsible for paying
both items on your own.
Q. What is title insurance?
A. In a nutshell, title insurance protects you
from defects in the title which existed prior to
you purchasing a property. You pay for an
owner’s policy of title insurance once, and it
protects you for as long as you own the
property. Keep in mind, however, that if you
refinance in the future, you will have to buy a
policy for the bank giving you the loan.
Q. What is a title
examination?
A. A title examination is performed on a
specific property to ensure that there’s clear
and marketable title. A search of the public
records in the city/town or county where the
property is located will reveal any liens
(including mortgages), easements, covenants, or
other items affecting the property.
Q. What are condo dues?
A. When you live in a condominium, you pay dues
(also known as fees) to an association made up
of condo owners. The monies collected pay for
items such as upkeep of the common areas,
insurance, and repairs which might be made at
some point in the future. Keep in mind that if
you don’t pay your fees, the association could
put a lien on your unit, which could jeopardize
your ownership interest in it.
Q. What’s the difference between a “note” and
a “mortgage?”
A. The promissory note is the document you
sign, in which you agree to repay the lender the
principal amount of money you are borrowing,
over a set period of time, at a fixed and/or
adjustable rate of interest. The mortgage allows
the lender to foreclose on your interest in the
property if you fail to pay accordingly.
Q. How much should I offer for a property?
A. There is no set amount of formula which tells
you how much to offer for a property. The
general rule of thumb, however, is about 10%
less than the asking price. Factors which should
go into your offer include whether it’s a
buyer’s or seller’s market, the location and/or
condition of the property, how long it’s been on
the market, and how badly you want it.
Q. What’s the difference between a mortgage
broker and a lender?
A. A mortgage broker’s primary role is to find
you a lender who will be wiling to loan you the
money necessary to purchase a property. Most
mortgage brokers have access to dozens of
lenders and loan programs. A lender is the party
actually loaning you the money.
Q. What’s the difference between a fixed- and
an adjustable-rate mortgage?
A. The interest rate on a fixed-rate mortgage
never changes; it stays the same during the
entire term of the loan. In contrast, the rate
on an adjustable-rate mortgage changes
periodically. Some start out as fixed for a
period of time, then begin to adjust at set
intervals. For your protection, there are caps
on how high rates can go with adjustable-rate
mortgages.
If you have questions, please send them to us.
We’ll be glad to answer them, and in a timely
manner. |
