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16 Questions To Ask a Home Inspector Before, During, and After a Home Inspection

October 6, 2020

If you’re buying a house, you know that your home inspector will check it out and make sure it’s in decent shape. But if you want to get to know your home beyond its pretty facade, you should pepper your inspector with questions—a whole lot of them, in fact!

But when you ask those home inspector questions is as important as what you ask. To ensure you get the most out of your home inspection, here’s a timeline of queries to hit before the inspection even starts, during the actual home inspection, and well after it’s over.

Questions to ask a home inspector before the inspection begins

So, how do you separate a great home contractor from a merely good one? It boils down to interviewing home inspectors to gauge how thorough a job they’ll do. To help, here are some of the best questions to ask.

Bonus: This’ll also help you know what to expect! Knowledge is power, my friends.

1. ‘What do you check?’

“A lot of people don’t know exactly what a home inspector is going to do,” says Frank Lesh, executive director of the American Society of Home Inspectors.

Wondering what does a home inspector look for? A whole lot—1,600 features on a home, to be exact.

“We inspect everything from the roof to the foundation and everything in between,” Lesh says.

Going into the inspection with a clear understanding of what the inspector can and can’t do will ensure that you walk away from the inspection happy.

2. ‘What don’t you check?’

There are limits. For instance, “we’re restricted to a visual inspection,” says Lesh. “We can’t cut a hole in somebody’s wall.”

As a result, an inspector will often flag potential problems in the report and you will have to get another expert—a roofer, HVAC person, builder, electrician, or plumber—to come back and do a more detailed examination.

“Understand that we’re looking at what exists in the house today,” says home inspector Randy Sipe, of Spring Hill, KS. “I can’t see into the future any more than anybody else.”

3. ‘What do you charge for a home inspection?’

A home inspection costs around $300 and $600, though it will depend on the market, the size of house, and the actual inspector. Generally you’ll pay the inspector the day of the inspection, so you’ll want to know in advance how much and what forms of payment are accepted.

Lesh cautions against going with an inspector who quotes you a very low price.

“That’s often a sign they’re having trouble getting customers,” he says.

Spending on a good inspector will more than pay for itself in the long run.

4. ‘How long have you been doing this?’

Or perhaps more important: How many inspections have you done? A newer inspector doesn’t necessarily mean lower quality, but experience can mean a lot—especially if you’re considering an older home or something with unusual features.

5. ‘Can I come along during the inspection?’

The answer to this should be a resounding yes! Any good inspector will want prospective owners to be present at the inspection. Seeing somebody explain your house’s systems and how they work will always be more valuable than reading a report, and it gives you the opportunity to ask questions and get clarifications in the moment. If an inspector requests that you not join him, definitely walk away. Run!

6. ‘How long will the inspection take?’

Inspections often take place during the workweek, when the seller is less likely to be around. Knowing how much time you’ll need to block out will keep you from having to rush through the inspection to get back to the office. You’ll get only a ballpark figure, because much will depend on the condition of the house. But if you are quoted something that seems way off—such as a half-day for a two-bedroom apartment, or just an hour for a large, historic house—that could be a red flag that the inspector doesn’t know what he’s doing, says Lesh.

7. ‘Can I see a sample report?’

If you’re buying your first home, it can be helpful to see someone else’s report before you see your own. Every house has problems, usually lots of them, though most generally aren’t that big of a deal. A sample report will keep you from panicking when you see your own report, and it will give you a sense of how your inspector communicates. It’s another opportunity to ensure that you and your inspector are on the same page.

Questions to ask a home inspector during a home inspection

Ideally, you should attend your home inspection—in person or by video—and ask your home inspector anything that comes up right then and there. The reason: Rather than trying to decipher your home inspector’s (very technical) report, it’s much easier for this pro to actually show you what’s going on with the house.

To help you get this essential show-and-tell session rolling, here are a few important questions to ask a home inspector that will help you size up a house yourself, and keep it in good condition for as long as you hang your hat there.

1. ‘What does that mean?’

During the inspection, your home inspector will go slowly through the entire house, checking everything to ensure there are no signs of a problem. He’ll point out things to you that aren’t as they should be, or may need repairs.

Don’t be afraid to ask any questions about what the home inspector is telling you, and make sure you understand the issue and why it matters. For example, if the inspector says something like, “Looks like you’ve got some rotten boards here,” it’s smart to ask him to explain what that means for the overall house—how difficult it is to repair, and how much it will cost.

Just keep in mind that your inspector can’t tell you whether or not to become the buyer of the house, or how much you should ask the seller to fix (though your real estate agent should be able to help with that).

2. ‘Is this a big deal or a minor issue?’

For most people, buying real estate is the biggest purchase they’ll ever make. It’s normal to start feeling panicky when your inspector is telling you the house has a foundation problem, a roof or water heater in need of repair, or electrical, heating systems or an HVAC system that isn’t up to code.

Don’t freak out—just ask the inspector whether he thinks the issue is a big deal. You’ll be surprised to hear that most houses have similar issues and that they’re not deal breakers, even if the fixes or repairs sound major. And if it is major? Well, that’s why you’re having the home inspection done. You can address it with the seller or just walk away.

3. ‘What’s that water spot on the ceiling, and does it need a repair?’

Don’t be shy about asking questions and pointing out things that look off to you during the home inspection and checking if they’re OK, real estate–wise. Odds are, if there’s something weird, your inspector has noted it and is going to check it out thoroughly. For example, if there’s a water spot on the ceiling, maybe he needs to check it from the floor above to know if it’s an issue.

Ideally, your inspector will ask you if there’s anything you’re specifically concerned about before he starts the inspection. Make sure to tell him if this is your first real estate purchase, or if you’re worried about the house’s age, or anything at all that strikes you, the buyer, as a possible negative.

4. ‘I’ve never owned a house with an HVAC/boiler/basement. How do I maintain this thing?’

Flaws aside, a home inspection is your golden opportunity to have an expert show you how to take care of your house.

“Inspectors are used to explaining basic things to people. If you have an inspection question, ask it,” Lesh says. “Don’t expect your inspector to teach you how to build a clock, but we are happy to answer and explain how things work.”

5. ‘What are your biggest concerns about the property?’

At the end of the inspection, the inspector should give you, in broad strokes, a summary of what he found. You’ll get a written report later, but this is a great moment to get clarity on what the inspector thinks are the house’s biggest issues, and whether or not they require further investigation.

Often, it’s a good idea to call in another home inspection expert—a plumber, electrician, roofer, or HVAC professional—to take a look at anything the inspector flagged.

You should walk away from inspection day with a mental punch list of things that need to be addressed by either the seller or another expert. In some states, there’s a limited amount of time for these negotiations to happen, so you and your agent may want to hit the ground running.

Your official home inspection report will have more detail, but you should know what’s on it by the time you leave the home that day.

Questions to ask a home inspector after the inspection is done

What are some questions to ask a home inspector after he’s finished the inspection? Because, let’s face it, just staring at that hefty report highlighting every flaw in your future dream home can send many buyers into a full-blown panic!

Know the right questions to ask a home inspector afterward, though, and this can help put that report into perspective. Here are the big ones to hit.

1. ‘I don’t understand [such and such], can you clarify?’

Just so you know what to expect, here’s how it will go down: A day or two after the inspection, you should receive the inspector’s report. It will be a detailed list of every flaw in the house, often along with pictures of some of the problem areas and more elaboration.

Hopefully you also attended the actual inspection and could ask questions then; if so, the report should contain no surprises. It should contain what you talked about at the inspection, with pictures and perhaps a bit more detail. If there’s anything major you don’t remember from the inspection in the report, don’t be afraid to ask about it.

2. ‘Is there any problem in this house that concerns you, and about how much would it cost to fix?’

Keep in mind, most problems in the house will likely be minor and not outright deal breakers. Still, you’ll want your home inspector to help you separate the wheat from the chaff and point out any doozies. So ask him if there are any problems serious enough to keep you from moving forward with the house.

Keep in mind that ultimately it’s up to you and your real estate agent to determine how to address any issues.

“The inspector can’t tell you, ‘Make sure the seller pays for this,’ so be sure you understand what needs to be done,” says Lesh.

3. ‘Should I call in another expert for a follow-up inspection?’

Expect to have to call in other experts at this point to look over major issues and assign a dollar figure to fixing them. If your inspector flags your electrical box as looking iffy, for example, you may need to have an electrician come take a look and tell you what exactly is wrong and what the cost would be to fix it. The same goes for any apparent problems with the heating or air conditioning, roof, or foundation. An HVAC repair person, roofer, or engineer will need to examine your house and provide a bid to repair the problem.

Why is this so important? This bid is what your real estate agent will take to the seller if you decide to ask for a concession instead of having the seller do the fix for you. Your inspector can’t give you these figures, but he can probably give you a sense of whether it’s necessary to call somebody in.

4. ‘Is there anything I’ll need to do once I move in?’

Wait, you’re still not done! It’s easy to forget the inspector’s report in the whirlwind of closing and moving, but there are almost always suggestions for things that need doing in the first two to three months of occupancy.

Lesh says he sometimes gets panicked calls from homeowners whose houses he inspected three months after they’ve moved in. Although he’d noted certain issues in his report, the buyers neglected the report entirely—and paid for it later.

“I had a couple call and tell me they had seepage in the basement,” Lesh says. “I pulled up their report and asked if they’d reconnected the downspout extension like I recommended. Nope. Well, there’s your problem!”

Everything you didn’t ask the seller to fix? That’s your to-do list. Isn’t owning a home fun?

The post 16 Questions To Ask a Home Inspector Before, During, and After a Home Inspection appeared first on Real Estate News & Insights | realtor.com®.

Is It Time to Refinance Your Mortgage?

March 10, 2020

Home for sale in San Francisco

Justin Sullivan/Getty Images

Worries about coronavirus have battered stocks and sent investors fleeing to the safety of U.S. government debt.

On Friday, the yield on the 10-year Treasury note fell below 0.7% for the first time. Earlier this week, the Federal Reserve cut its benchmark rate to a range between 1% and 1.25%.

Mortgage rates are expected to fall along with those yields. The 30-year fixed-rate mortgage averaged 3.29% during the week of March 5, according to Freddie Mac, and the 15-year fixed-rate mortgage dropped to 2.79%.

“Given the movement in Treasury rates right now, they’re probably going to go lower,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “I think low mortgage rates are going to be around for a while.”

If the yield on the 10-year Treasury declines even further, mortgage rates could drop more, too, though they don’t always move in lockstep with the government benchmark.

“This opens up a whole new world of refinancing for mortgage borrowers,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry research group. “It’s a matter of time in terms of how fast lenders lower their rates to reflect a 10-year [U.S. Treasury note] and it’s also a question of how fast they want to go to that level, but at a minimum, we’re talking mortgage rates at 3.25% if not below 3% in the next few weeks, if everything stays the same—and frankly, that would be a once-in-a-lifetime refinancing opportunity.”

Whether it makes sense to refinance a mortgage now comes down to a host of personal factors. It depends, for example, on the cost of a refi, how long you plan to stay in your home, how much you hope to save, what you think your house is worth—and your view of the world economy.

“Yields have fallen quite steeply and the reason is that there’s concerns about a big slowdown in the global economy, largely because of the coronavirus,” said Kathy Jones, senior vice president and chief fixed income strategist at the Schwab Center for Financial Research.

For those considering a refi now, first look at the difference, or spread, between the current rate and the rate in the market. Then looks at costs, as a refinancing means paying significant closing costs—including title insurance and an appraisal—which can often amount to a few thousand dollars.

If the potential saving from a lower-rate mortgage doesn’t make up for those costs, it may not make sense to refinance just yet. “The old rule of thumb used to be two years,” Mr. Cecala said. “If you can pay it back within two years and you expect to be in the house five years, then why not do it?”

Rates have fallen before, so those who wait to refinance could potentially see even better ones. As the coronavirus continues to develop and its effects are felt around the globe, Mr. Cecala said the mortgage market could see even more changes.

Lauri Droster, branch director at RBC Wealth Management in Madison, Wis., suggests considering a refinance if there’s a difference somewhere between one-half a percentage point or 1 percentage point.

Ms. Droster said it’s easier for people to understand the potential saving when they make it personal. Calculate how refinancing could affect monthly mortgage payments rather than simply looking at the percentage difference and examining it in an abstract way.

“When they see it in real dollars, then they can make that comparison,” she said. “That’s where they can really see what it means, when they can see it in dollars and say, ‘I’m paying $1,500 a month right now for my mortgage and 1% lower is down to $1,200 a month.’”

For those with adjustable-rate mortgages, however, Mr. Cecala recommends borrowers check how often their rate adjusts. Most only do so once every six or 12 months, in which case some homeowners might want to refinance from an ARM to a fixed-rate, he said, to lock into low rates.

“If you’re saying ‘I’m planning on being in this home for the next five years, and I don’t want to worry about what’s happening with interest rates,’ that’s pretty much a no-brainer,” he said.

Those with high loan-to-value ratios, however, may not be able to refinance, despite the fact that they may want to do so. But Sam Khater, chief economist at Freddie Mac, said that with home values steadily rising over the past decade, this circumstance is rare.

Dan Egan, managing director of behavioral finance at Betterment, is himself considering refinancing his house. To him, the move makes sense because he and his wife have decided to also shorten the time period of their loan from a 30-year mortgage to a 15-year mortgage. Their net monthly payments could be higher as a result, but he’d be paying lower interest rates over a shorter time. His tax situation wouldn’t change as “the standard deduction is high enough.”

“My rate was 4% and it was a 30-year mortgage I am six years into, so I’m looking now, especially with the current softening in the stock market. If rates get a little lower, I could be looking at a new mortgage rate of 3.5%,” he said. “The difference between 4% and 3.5% may sound small, unless you’re looking at those interest payments over many years. So for myself, that change would mean saving somewhere around $500 a month, which is significant.”

With the mortgage rates dropping and refinancing interest growing, Mr. Cecala said that the math “gets easier.”

“The more you can adjust the interest rate, the more palatable it is to pick up closing costs,” he said. “If you’re saving $800 a month, you don’t balk at spending $8,000 in closing costs because you’ll make that back within a year.”

When it is worth refinancing

  • Home buyer puts 20% down on a home worth $266,300, the median home price in January.
  • No plans to move soon.
  • Pays a 4% rate, resulting in a monthly payment excluding taxes, fees and insurance of $1,017.09, according to LendingTree.
  • Dropping to a 3.25% rate would decrease the payment from $1,017.09 to $927.16. The homeowner would save around $90 a month, with exclusions.
  • Assuming refinancing costs of $2,000, this homeowner would need to stay in the home for a little less than two years to make it worth the money.

When it isn’t worth refinancing

  • Home buyer puts 20% down on a home worth $266,300, getting a 4% rate on the $213,040 fixed-rate loan.
  • Plans to move within the next two years.
  • Dropping to a 3.65% rate saves $42 a month, with exclusions.
  • With refinancing costs of $2,000, they’d need to stay closer to four years to make refinancing worth the cost.

The post Is It Time to Refinance Your Mortgage? appeared first on Real Estate News & Insights | realtor.com®.

You’d Better Ask These 5 Crucial Questions Before You Buy a House

October 21, 2019

marchmeena29/iStock

No matter how many episodes of “House Hunters” or “Love It or List It” you’ve watched, buying a home inevitably comes with surprises. Though a sharp real estate agent will help you navigate these hidden challenges, before you start shopping for a house, you should take account of some important things that you probably haven’t considered.

Curious what you might be missing? Here are five questions you’d never think to ask yourself but totally should before buying a home.

1. Have I checked my credit report?

When you apply for a mortgage to buy a home, lenders want some reassurance that you’ll repay them later. Of course they do! One way they assess this is to check your creditworthiness, by scrutinizing your credit report and score. Having a high credit rating or FICO score (named after the company that created it, the Fair Isaac Corporation) proves that you have reliably paid off past debts, whether they’re from a credit card, college loan, or other forms of debt.

Credit scores can range from 300 to 850; in general, what’s considered an excellent credit score is in the range of 750 to 850. A good credit score is from 700 to 749; a fair credit score, 650 to 699. A credit score lower than 650 is deemed poor, meaning that your credit history has had some rough patches.

The three nationwide consumer credit-reporting companies—Equifax, Experian, and TransUnion—are each required to provide you with a free copy of your credit report annually if you request it. You can order all three at once, or stagger them throughout the year, from one central source: AnnualCreditReport.com.

You should closely examine each report before you meet with a mortgage lender. Why? Because even if you’re fairly sure you’ve never made a late payment, 1 in 4 Americans find errors on their credit file, according to a 2013 Federal Trade Commission survey. The simple truth is that creditors make mistakes reporting customer slip-ups.

If you discover errors, you can remove them from your credit report by contacting Equifax, Experian, or TransUnion with proof that the information was incorrect. From there, they will remove these flaws from your report, which will later be reflected in your FICO score.

2. Who’s the best real estate agent for me?

Finding the right real estate agent to partner with can be a daunting task. A lot’s at stake, and there’s certainly no shortage of options. Should you go for a savvy veteran agent or eager newbie?

Veteran real estate agents can provide sage advice, based on the breadth of knowledge they’ve built up over the years. Having dealt with just about every issue that can affect a sale, they can help you navigate any complicated problems that may arise.

However, experienced agents are usually in high demand, working with several clients at once. Because their time is limited, they may not be available to show you as many homes in person, meet you for last-minute showings, or handle other pressing issues.

Rookie agents, meanwhile, bring fresh energy and enthusiasm to their job. And, because beginners usually have fewer clients than more seasoned agents, they may be able to spend more time with you than an experienced agent who’s juggling multiple clients.

In short, choosing the right agent boils down to what kind of customer service you’re looking for. Need help finding one? You can search for agents in your area at realtor.com/realestateagents, where you’ll find such details as their years of experience, number of homes sold, clients’ reviews, and more.

3. If I get a new job, am I likely to have to relocate?

Your career plans play a pivotal role in determining whether it makes sense for you to buy a house.

“Previous generations planned to get one job, keep it forever, and ultimately retire. Buying into a house because they were looking for a permanent living situation made a lot more sense,” says Chandler Crouch, broker at Chandler Crouch Realtors in Fort Worth, TX. “Now, job-hopping is prevalent.”

Indeed, according to a recent report from the Bureau of Labor Statistics, the median tenure of workers of ages 55 to 64 is a whopping 10.1 years, more than three times that of workers ages 25 to 34, who stay at a job for 2.8 years on average.

Changing jobs won’t be a big deal if your new gig is in your current city, but if there aren’t a ton of job opportunities in your industry in your area, you may find yourself having to relocate a year or two after you bought your home—in which case you may not be able to recoup the amount of money it cost you to purchase the house.

“It honestly isn’t a good idea to buy a house unless you plan on staying there for at least five years,” Crouch says. If you’re considering buying a house but already know you are likely to move in that time frame, remaining a renter may be your best choice.

4. Can I afford to pay closing costs?

Getting a mortgage comes with a number of closing fees, which borrowers have to pay when they reach the settlement table. These are out-of-pocket expenses that you need to budget for.

Although buyers and sellers both typically pitch in to cover closing costs, buyers shoulder the lion’s share of the load (3% to 4% of the home’s price) compared with sellers. So, on a $250,000 home, your closing costs could come to about $7,500 to $10,000.

Typical closing fees include the following:

  • Closing fee ($300 to $600): A representative from the title company will come to your closing to supervise the transfer of title, and you’ll have to pay for the service.
  • Lender’s title insurance (usually 0.5% of the purchase price): This protects your lender if something was missed in the title search. The cost depends on the size of the policy and is set by the state.
  • Title search ($300 to $600): Your lender will do a search to ensure there are no liens on the property or anything that could prevent you from purchasing it. Sometimes this will be bundled with other title fees in your closing document.
  • Wire or courier fees ($30 to $100): If documents need to be sent overnight or money needs to be wired, you’ll pay these fees at closing.
  • Document recording fees for the deed and mortgage ($125 on average): Every time a home is sold, the government must record the change of ownership; this fee is typically paid by the home buyer.

Under federal law, borrowers must receive what’s called a “loan estimate” form (previously called a “good-faith estimate”) that outlines their approximate closing costs from their mortgage lender. When you obtain this information, you’ll be able to gauge whether you can pay for closing costs and truly afford to purchase a home.

5. Am I dead set on finding my ‘dream home’?

People throw around the words “dream home” a lot. (Heck, we’re guilty of it.) However, the honest truth is this: “There’s no such thing as a perfect house,” says Daniel Gyomory, a real estate agent in Northville, MI.

Some home buyers, though, have a hard time accepting this, Gyomory says, and make the mistake of holding out for their ultimate forever home.

If your list of “must-haves” is immensely long (you’re looking for great schools, affordable home prices, easy access to public transportation, good walkability, and lots of shops and restaurants) but you’re not willing to budge on anything, shopping for a house may wind up being a waste of your time.

This is why it’s important to sit down and identify your housing criteria in order to get a better picture of what it is you’re looking for—and whether that kind of home exists.

The post You’d Better Ask These 5 Crucial Questions Before You Buy a House appeared first on Real Estate News & Insights | realtor.com®.

5 Surprising Financial Lessons I Learned About Paying for My First Home

October 3, 2019

aydinmutlu/iStock; realtor.com

I pride myself on being pretty financially savvy—after all, I’m a personal finance writer. I’m well versed in best practices for saving and spending, the ins and outs of HSAs and IRAs, and the basics of investing.

But when it came time to buy my first house, I had to put my ego aside: I was way out of my depth as I navigated the world of mortgages, closing costs, and escrow.

While all of the Budgeting 101 basics still apply to purchasing a home—top tip: Don’t buy anything you can’t afford!—some aspects of the process can come as a surprise to first-time buyers.

Gearing up to buy a house of your own? Get acquainted with these five lessons that I learned the hard way before you start shopping. Then, you’ll be ahead of the curve when it comes time to make an offer on your ideal home.

1. Don’t be fooled by your mortgage pre-approval amount

One of the first steps on the road to homeownership was requesting a mortgage pre-approval letter from a mortgage lender. I was shocked when my husband and I received a letter with a much higher number than we had ever considered spending.

The lender thought we could afford a house that cost how much?!

I quickly learned that a pre-approval letter is just assurance from a lender that the buyer is in good financial standing to take on a mortgage of a certain size. Lenders evaluate your financial history to come up with a pre-approval amount. Don’t confuse that number, though, with your actual budget for buying a house. In other words, just because you’re pre-approved for up to, say, $300,000, doesn’t mean a $300,000 mortgage will fit in your budget.

For us, we knew we didn’t want to stretch ourselves thin with a heftier mortgage, even if we were technically approved to take one out.

2. Closing costs can add up—and be complicated

Closing costs include out-of-pocket expenses like title insurance, notary fees, and the cost of the deed—and they can add up quickly. So when we made an offer on our house, we decided to ask for a credit from the sellers toward our closing costs—a common practice in which, typically, the seller advances an amount in cash that’s then tacked on to the purchase price. But I was surprised when our Realtor® urged us not to ask for too much from the sellers at closing.

“Some loan programs only allow a certain percentage of the sale price to given to the buyer as a credit,” says Joe DiRosa, a real estate agent with RealtyTopia in Pennsylvania.

That means that if you’re offering $200,000 for a house and your lender only allows you to accept 2% in closing costs, you shouldn’t ask for $5,000—that would be $1,000 down the drain, since you can only accept up to $4,000 in credit. Before you make an offer, ask your lender if your loan institutes a limit on closing cost credits.

3. PMI isn’t actually the devil

Private mortgage insurance—PMI for short—is at once a blessing and a curse. Lenders typically require it of buyers who are putting down less than 20% on their mortgage. This puts homeownership within reach for more people, but it also means an additional monthly payment that doesn’t add to the new owner’s equity.

For that reason, PMI sometimes gets a bad rap—better to shell out the necessary down payment cash (if you can) than waste your money on insurance, right? But in some cases, it’s in your best interest to put less money down and pay the PMI.

That was the case for my husband and me. We decided to hold on to some of the cash we would have put toward a 20% down payment and use that money to renovate our home and pay off other debts with higher interest rates. Our PMI payment has been manageable—we pay about $75 a month—and it’s worth it to keep our money in our bank account, where we can use it for projects like replacing the roof, renovating bathrooms, and creating a master suite.

4. You might have to make escrow payments

“Escrow” was a foreign word to me before buying a house. (Confession: I still picture a crow every time I hear it.)

Because we took out a loan with PMI, we were required to pay into an escrow account for our property taxes and home insurance. Escrow simply refers to the separate account where that money is held; basically, our lender sets aside the money for taxes and insurance, which acts as a safety net to ensure that we sock away enough money for those expenses.

While it’s nice to know we’re saving enough for taxes and insurance by paying into escrow, it’s also frustrating for control freaks like my husband and me, who would rather manage our money ourselves—preferably by putting that cash into a high-yield savings account where it can accrue interest. We’re looking forward to canceling our escrow payments as soon as we’ve built up enough equity in our home to remove PMI.

5. You need to budget for surprises (and your own mistakes)

During our home inspection, the inspector ran the dishwasher to make sure it worked—all good. Then, the day after we moved in, we loaded the dishwasher, hit “Start”—and it was dead. After flicking the electrical circuits on and off to no avail, we finally accepted that we would need to replace the dishwasher sooner than we had bargained for.

Several hundred dollars later, we learned that dishwashers are required to have their own wall switch, per local code. It turned out the old dishwasher wasn’t broken after all—the switch was just turned off.

All we could do was laugh, too slap-happy and exhausted from renovating to beat ourselves up much about the mistake. At least we planned to replace the dishwasher sooner or later, and we had enough savings to endure the blow. But the incident was a reminder that costly surprises (and stupid mistakes) are inevitable when you’re new to homeownership—and even when you’re not.

The post 5 Surprising Financial Lessons I Learned About Paying for My First Home appeared first on Real Estate News & Insights | realtor.com®.

Closing Costs for Sellers: Common Fees Associated With Selling Your Home

September 14, 2019

closing cost for sellers

iStock

If you’re monitoring the value of your home so you can sell it and reap a worthwhile profit, don’t forget to factor in the closing costs for sellers into the sale price.

You may be estimating that your sale price could be $350,000, which could pay off your $200,000 home loan and reap you a $150,000 profit. But before you start counting your dollars and debating the size of the down payment for your next home, you need to calculate the closing costs for the seller.

While buyers also pay closing costs (here’s more info on typical closing costs for buyers), you’ll see a long column on the HUD-1 Settlement Statement for seller closing costs.

Closing costs for sellers of real estate vary according to where you live, but as the seller you can expect to pay anywhere from 6% to 10% of the home’s sales price in closing costs at settlement. This won’t be cash out of the seller’s pocket; rather it will be deducted from the profit on your home—unless you are selling with very low equity on your mortgage. In this case, sellers may need to bring a little cash to the table to satisfy your lender—and some closing costs may be held in escrow.

1. Seller costs

One of the larger closing costs for sellers at settlement is the commission for the real estate agents involved in the real estate transaction.

Commissions on real estate are negotiable and vary somewhat by market, but a typical commission is 6% of the sales price of the home split between the listing real estate agent and the buyer’s agent.

For a $350,000 purchase price, the real estate agent’s commission would come to $21,000. Buyers have the advantage of relying on sellers to pay real estate agent commissions.

2. Loan payoff costs

Most home sellers often seek out a sales price for their home that will pay off their mortgage and satisfy their lenders.

Your mortgage payoff balance will often be a little higher than the remaining balance on your mortgage and even the buyer’s purchase price. This is because of lenders’ prorated interest on the mortgage.

In some cases, your lender may require you to pay a prepayment penalty for paying off your mortgage loan before the end of the term. If you have a home equity loan or line of credit, in addition to your mortgage, the lender will require this be paid in full at settlement as part of closing costs for the seller.

Be sure to talk to your lender about what will be required to pay off the mortgage so that you get an accurate picture of closing costs.

3. Transfer taxes or recording fees

Transfer taxes, recording fees, and property taxes are key parts of a seller’s closing costs.

Transfer taxes are the taxes imposed by your state or local government to transfer the title from the seller to the buyer. Transfer taxes are part of the closing costs for sellers.

Along with transfer taxes and transfer feeds, property taxes must also be up to date for sellers before they hand over keys to the buyer.

4. Title insurance fees

Title insurance fees are another fee to keep in mind when you sell real estate. As part of closing costs, sellers typically pay the buyer’s title insurance premium. Title insurance protects buyers and lenders in case there are problems with the title in a real estate deal.

5. Attorney fees

If you have your own attorney represent you at the settlement of your real estate sale, the seller may have to pay attorney fees as part of closing costs.

Market traditions vary, so while in some areas both the buyers and sellers have their own attorneys, in others it’s more common to have one settlement attorney for the real estate transaction. In some areas the buyer pays the attorney fees, while in others the seller pays.

Additional closing costs for sellers

Additional closing costs for sellers of real estate include liens or judgments against the property; unpaid homeowners association dues; prorated property taxes; escrow fees; and homeowners association dues included up to the settlement date. These closing costs for a home sale are separate from what buyers pay at closing.

Depending on the real estate contract, closing costs may also include termite inspection and remediation, if necessary; home warranty premium for buyers; and repair bills or a credit to buyers for repairs for items found during a home inspection.

Also, don’t forget to estimate some of the closing costs associated with preparing to sell, such as cosmetic repairs or improvements to make your home more attractive to buyers. Those closing costs may be returned with a higher sales price, but you should still include them in your calculations.

The post Closing Costs for Sellers: Common Fees Associated With Selling Your Home appeared first on Real Estate News & Insights | realtor.com®.

5 Questions to Ask Before Selling Your Home—and Why Missing Even One Can Cost You Dearly

July 10, 2019

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Selling your house is not as simple as just putting it on the market and waiting for offers from eager buyers to roll in. (Ah, if only…) If you have any hope that your sale will go smoothly, you’ll have to sit down, take a hard look at your house, and ask yourself a few questions.

Though some steps of the home-selling process seem fairly straightforward—find a real estate agent, set a list price, hold a few open houses—there are a number of lesser-known factors that play a big role in whether your house gets sold, and how much you’re going to fetch for it.

To help you enter the home-selling process fully prepared and with your eyes open, here’s a list of five essential questions to ask yourself to get started.

Overlook these things at your own risk!

1. Can I afford to sell my house?

Although you’re going to cash a check when your house gets sold, as the adage goes, it takes money to make money. Some home-selling costs are obvious, like commissions to the listing and buyer’s agents (which typically amount to 5% to 6% of your home’s price), but there are a number of other expenses to take into consideration.

Here are some expenses home sellers often overlook:

  • Professional photographs: About 4 in 10 home buyers start their home search by looking at properties online, according to the National Association of Realtors®. And, no surprise, photos are overwhelmingly viewed first. That may explain why many real estate agents recommend home sellers hire a professional photographer to take their listing photos. While the cost varies by area and the size of your property, you can expect to pay about $500 to $1,000 for professional photos.
  • Landscaping: No doubt, curb appeal is crucial. After all, it’s what gets prospective home buyers in your front door. What many home sellers don’t realize, though, is just how expensive professional landscaping can be. The average cost of a full-on landscaping job—flower beds, plants, trees from scratch—is around $3,228, according to HomeAdvisor. But improving your landscaping can raise your home’s value by up to 12%, according to research from Virginia Tech.
  • Staging: It’s all about presentation. In a recent survey from NAR, about 83% of buyer’s agents said staging a home makes it easier for a buyer to visualize the property as a future home. In addition, staged homes sell, on average, 88% faster and for 20% more than nonstaged homes. Last year the median dollar value spent on home staging was $400, NAR reports, but costs can increase significantly depending on how many rooms you’re staging.
  • Closing costs: Closing costs will likely be your second-biggest expense behind commission fees. You can expect to spend roughly 2% of your home’s sale price, says Keith Gumbinger, vice president at mortgage information resource HSH.com.

2. What do I need to disclose to home buyers?

As much as you want to present your house in the best light, you should also be prepared to disclose some of your home’s flaws, says Rick Davis, a Kansas real estate attorney.

Though disclosure laws vary by state—and even by city—sellers should disclose any known facts about the physical condition of the property, existence of dangerous materials or conditions, lawsuits or pending matters that may affect the value of the property, and any other factors that may influence a buyer’s decision.

“Most sellers think it is in their best interest to disclose as little as possible,” says Davis. “I completely disagree with this sentiment. In the vast majority of cases, disclosing the additional information, especially if it is something that was previously repaired, will not cause a buyer to back out or ask for a price reduction.”

3. Should I hire a home inspector?

Many home buyers will include a home inspection contingency in their offer. But some real estate agents recommend home sellers hire a home inspector to perform what’s called a “pre-inspection,” where a professional inspector scrutinizes your property for problems before it’s even listed.

There are pros and cons, of course, to doing a pre-inspection. One huge advantage is that pre-inspections give sellers the ability to fix problems ahead of time—and present buyers with a clean bill of health on the property. This can be a strong selling point if you have an older house. However, pre-inspections cost money (about $200 to $500 on average), and just because you hired a home inspector doesn’t mean the buyers won’t hire their own—and their results won’t necessarily be the same.

4. Which areas of my home get the most attention?

Even if you don’t have the money to stage your entire house, many home stagers recommend home sellers, at the very least, stage their house’s living room, kitchen, and master bedroom, since home buyers focus on those areas. Also don’t forget about your home’s entryway.

According to the “Psychology of House Hunting” report by BMO Financial Group, 80% of prospective buyers know if a home is right for them within seconds of stepping inside. Therefore, you’ll want to spruce up the area they’ll see in that time frame—namely, your foyer.

Most important, make sure the foyer is decluttered.

“It can be a challenge to keep this area tidy since that’s where homeowners put their mail, keys, coats, shoes, dog leashes, and other items,” says Sissy Lappin, a real estate broker in Houston.

Pro tip: Containers are key for keeping this mess under control. Use baskets or racks for shoes, bowls for keys and change. Also, be sure to stash any seldom-used items elsewhere.

Another room home sellers make the mistake of overlooking: the garage. In fact, a recent realtor.com® survey found that 32% of home buyers said the garage is one of the most important rooms in a house! Thus, it may make sense to jazz up the space, like by adding storage space or even a fresh coat of paint.

5. What do I have to leave behind when my house is sold?

While it’s ultimately your decision what house items you leave behind for the home buyer, there are rules governing what things convey with your property.

“The law says that anything bolted to the wall or ceiling goes to the buyer unless specifically excluded in the contract,” says Avery Boyce, a real estate agent with Compass Real Estate in Washington, DC. “If you want to take your flat-screen TV, chandelier, or custom pot rack, be sure to label it as soon as the house goes on the market, so that buyers don’t bank on owning that item and wind up disappointed.”

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What Really Happens When You Sell Your House for More Than You Owe on a Loan

June 26, 2019

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What happens if you sell your house for more than you owe on your loan? If you find yourself asking this question, congratulations are most likely in order. Selling a house for more than the value of your mortgage often means you’ll walk away with a nice profit.

But not always. Sometimes, even if a home’s sales price is higher than the mortgage amount owed, a seller may not see a dime—or may even owe money at the closing table instead! Here’s how to figure out if you’re going to make or lose money when you sell your house.

Where your profits go when you close the deal

During your home closing—the final leg of the sales process where you swap your house keys for a check—there’s traditionally a go-between who handles transferring funds from buyer to seller. That might be an escrow company, a real estate agent or attorney, or a title company, depending on where you live, but they’re the ones who will take the buyer’s money (usually a check from the lender) and use it to pay off the seller’s mortgage, says Bryan Zuetel, managing broker of Esquire Real Estate and the managing attorney of Zuetel Law Group, in Pasadena, CA.

Yet that check doesn’t just go straight into a seller’s pocket. Many other parties must be paid off first. Here are a few costs that may eat up your profits.

Real estate agent commissions

First up, the seller’s real estate agent has to be paid a commission—as well as the buyer’s agent, if the buyer had one, says Robert Berliner Jr., a real estate attorney with the Berliner Group, in Chicago.

The typical commission for a seller’s agent is around 5% to 6% of the sales price of the house, although just how much your real estate agent gets will be outlined in the listing agreement—the document you signed when you hired the agent to sell your house.

Traditionally, the title company, escrow company, or lawyer handling your closing will cut a check directly to your listing agent, Berliner says. This agent will split this with the buyer’s agent who helped secure the deal.

If for some reason there isn’t enough money left over from the sale to pay your agent, you’ll need to be ready to write a check at closing to make up the difference.

We know: It’s a downer to write a check on the day you sell your home, but it happens if housing prices have dipped since you bought the place. Comfort yourself with the thought that you might be getting out before suffering more serious losses.

Closing costs

The buyer typically pays most closing costs, but sellers often face some closing costs, too. These fees can amount to as much as 1% to 3% of the purchase price of the house. Everything from recording fees to title insurance premiums can come out of the sales price of the house—aka the money the buyer pays to the seller—as part of closing.

And you guessed it, these fees will be paid during the process, so they’ll come right out of the money left over after you pay off your mortgage.

Property taxes

After the agents get their cut and the closing fees are settled, any taxes you owe on the property will be levied. In many states, taxes are paid a year in arrears, Berliner says. In other words, the real estate taxes paid in 2019 are actually the taxes on the property for the year 2018. Your buyer isn’t responsible for taking on the taxes for the time you owned the property—which means you may have to pay up.

Some states also levy a transfer tax when property is sold, which falls on the seller to pay out of the price of the home.

Just how much you’re facing can vary greatly depending on where you live, Zuetel says, but you can expect costs roughly from $50 to $225.

Anything left? It’s yours!

After your loan is paid, the agents get paid, and any fees or taxes are settled, if there’s money left over, you get to keep the balance. Congratulations! The money can be paid by check or wired straight into your account.

To see just how much you’re expected to net, you can ask your closing attorney, escrow officer, or even the title company for a draft settlement statement before closing. This document details all of the closing costs, real estate commissions, fees, and taxes that will come out of the sales price of the home.

The post What Really Happens When You Sell Your House for More Than You Owe on a Loan appeared first on Real Estate News & Insights | realtor.com®.

Do You Get Your Earnest Money Back at Closing?

June 24, 2019

Can I Get My Earnest Money Back At Closing?

Sargis Zubov/iStock

Do you get your earnest money back at closing? If you’re buying a house and planning to finance the purchase with the help of a mortgage, the question is bound to come up. The short answer is: You don’t usually get your earnest money back at closing.

But hold on! Sometimes earnest money is returned at closing. What? Read on to find out what happens to your earnest money at closing.

What is earnest money, anyway?

So you’ve heard the term “earnest money” thrown around during the purchase process, and you’re not quite sure what it means? Sometimes called “good-faith money” or a deposit, earnest money is a sum that home buyers put down when they make their offer on a house, to show they’re committed to the purchase.

Earnest money (typically about 1% to 2% of the amount you plan to pay for the house) is put down by a buyer within five days of an offer being accepted by a seller. The money is then deposited into an account by an escrow agent.

Maybe you’ve heard it called “going into escrow“? That’s because the escrow officer will set the earnest money aside while you continue the steps of buying a house, such as getting an appraisal so your bank will approve the purchase or sending a home inspector to the house to ensure there are no reasons you should back out of the deal. They can’t touch that money during that time, and neither can the seller!

Do I get my earnest money back at closing?

If the appraisal comes through at a price that makes your lender happy, and the home inspection doesn’t turn up anything alarming, eventually you’ll get to closing—the end of the home-buying process—when you pay the seller and walk away with keys to your new castle.

This is when your escrow agent is going to pull your earnest money out of escrow. What happens with it next is typically dependent on the sort of earnest money that was put down, says Keith Lucas, broker and owner of the Charleston Real Estate Company, in Charleston, SC.

If you put down cash (which is nearly always the case), the earnest money is traditionally applied to closing costs or toward your down payment—the portion of the sale price that buyers pay on their own in conjunction with a mortgage.

But there are times when you might get the earnest money back. Maybe you have secured a loan with no down payment required, such as a Veterans Affairs loan or a mortgage backed by the U.S. Department of Agriculture. If that happens, the earnest money will be applied to closing costs instead of down payment. If there’s money left over after the closing costs are paid, you will get the surplus back.

But sometimes the earnest money isn’t actually money at all.

Wait a second. How can there be money that isn’t, well, “money”? It turns out, sometimes that good-faith deposit can just be something of “good and considerable value.”

“There are cases where a watch, car, boat, real estate, or precious metals have been used as an earnest deposit,” Lucas says. “In that case it might be returned to the buyer or liquidated by the seller and put toward the purchase price at closing.”

Bottom line: Even if you don’t get your earnest money back at closing, don’t worry! That big chunk of change you put down at the beginning of the home-buying process hasn’t disappeared. It’s been used to help pay for your brand-new house.

The post Do You Get Your Earnest Money Back at Closing? appeared first on Real Estate News & Insights | realtor.com®.

How to Lower Closing Costs: A Guide for Home Buyers

April 10, 2019

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If you’re buying a house, you might wonder how to lower your closing costs—a daunting list of fees that accompany a home purchase.

On average, typical closing costs can total anywhere from 2% to 7% of a home’s purchase price. So on a $250,000 home, closing costs could amount to anywhere from $5,000 to $17,500. In short: Closing costs are a huge chunk of change, and span a wide range of fees.

But, much like haggling on the price of a house, you can negotiate closing costs down to a more affordable level. The key is knowing which fees are fixed—and which ones have wiggle room that you can work to your advantage.

What are closing costs, anyway?

Before you can lower your closing costs, you need to know what they are. If you don’t need a mortgage, your closing costs will be limited, but if you do need a home loan, your closing costs will typically encompass the following fees:

  • Agent commissions
  • Attorney fees
  • Lender fees
  • Mortgage insurance
  • Title search fees
  • Recording fees
  • Property taxes
  • Transfer taxes
  • Appraisal fee
  • Title insurance

 

When do you learn what your closing costs will be?

You don’t have to wait until closing to find out how much your closing costs will be. You can get a sense of what you will owe in your loan estimate document, which federal law requires lenders to provide within three days of the loan application.

While the closing costs on this loan estimate document should be fairly accurate, you won’t receive the final number until three days before you actually close on your home. That’s when you’ll receive another document called your closing disclosure, which contains your final, official closing costs.

Closing costs you can’t change

First off, prepare to pick your battles, because not all closing costs are negotiable and worth wasting your haggling energy on.

“For example, the costs of title fees and government fees—transfer taxes, if applicable—are a big chunk of the cost, and a buyer cannot negotiate these,” says Heather McRae, senior loan officer with Chicago Financial Services, in Chicago.

Whether or not you, as the home buyer, have to pay these fees depends on where you live. In New York City, a condo buyer will typically pay transfer taxes, but sellers pick those up for co-op purchases, as well as for single-family homes in Westchester County, says Peter Grabel, managing director of Luxury Mortgage, in Stamford, CT.

How to lower closing costs

So, there’s not much wiggle room with taxes and local fees, but there are some areas where you can lower your costs. For example, some costs, such as title services, are provided by a third party, so you can look for a less expensive provider. Some areas with flexibility include the following:

  • Your title costs: Title insurance can vary widely across the U.S.—and even by type of home, says John Walsh, president of Total Mortgage, in Milford, CT. Sometimes title insurance is bundled with settlement services. You may be able to research and find a title and settlement company that is less expensive than the one your lender recommends. Some states require a borrower to use a lender-selected title insurance provider, but not all states do, according to Greg McBride, chief financial analyst for Bankrate.com. In states where you can find your own title insurance provider, you can look online for other title service providers that are less expensive, and then let your lender know about your preferred title servicing company.
  • Your lender fees: Another way to lower closing costs is by choosing the right lender. Some lenders may offer lower origination fees for customers who already have a checking or savings account at the bank and want to add a mortgage, says Peggy Lawlor, a mortgage strategy executive with Bank of America. For example, Bank of America just rolled out a Preferred Rewards program that offers up to $600 in reduced closing fees for customers, depending on the dollar amount of a customer’s deposits. If you’re dismayed by the lender fees on your loan estimate, contact other lenders to see if you can find a better deal.
  • The day you close: The day of the month when the mortgage closes can also affect costs, says Walsh. “If you close on Nov. 5, you have to pay the per diem interest from the 5th to the 30th; but if you close on Nov. 28, it’s only three days,” he adds. You’ll save a bit in interest costs if you close as close to the end of the month as possible.
  • Your closing attorney: Many borrowers stick with a lender-appointed attorney to represent them at the closing, but they are not required to do so, and you can hire your own, says Lawlor. So feel free to shop around for one who offers great rates.

 

How to negotiate closing costs

All in all, Michael Press of Penrith Home Loans, in Seattle, says that lowering closing costs is doable if home buyers are assertive and willing to put in the time to shop around.

“The most important first step for home buyers is to ask,” he says. For instance, he recommends home buyers ask their agent to negotiate a seller credit, which can significantly lower closing costs. A seller credit is when the seller agrees to pay all or part of the closing costs. Not every seller will be willing to cover closing costs, but sellers who have already purchased a home may be eager to close the deal as soon as possible. Plus, it typically doesn’t hurt to ask.

For home buyers purchasing newly constructed homes, Press recommends checking into builder incentives. Builder incentives are similar to seller credits, but they’re offered by the company doing the new home construction. To take advantage of builder incentives, you may need to work with a lender of their choosing, so be sure to look carefully at the offer as a whole to ensure it’s actually saving you money.

Anya Martin contributed to this report.

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Top 10 Questions to Ask a Mortgage Lender: Do You Know Them All?

March 7, 2019

mortgage lender

Weekend Images Inc./iStock

What are the best questions to ask a mortgage lender before you lock in a home loan? If you want to find the very best mortgage for your needs, it pays to not automatically go with the very first lender you see.

“You need to shop around to make sure you’re getting the best interest rate and loan terms,” says Peggy Yee, supervising broker at Frankly Realtors, in Vienna, VA, who recommends that home buyers meet with at least three lenders before they pick.

So how do you compare and contrast your options effectively? Ask these 10 questions below to get a sense of who’s right for you.

1. What types of home loans do you offer?

Some lenders offer a wide range of mortgage products, while others specialize in only one or two types of home loans. Finding a lender that offers the type of mortgage you need is a must. These are the most common types of home mortgages:

  • Fixed-rate loan: True to its name, a fixed-rate mortgage means that the interest rate you pay remains fixed at the same level throughout the life of your loan (typically 15 or 30 years).
  • Adjustable-rate mortgage (ARM): An ARM offers a low interest rate for an introductory period. After that period—typically two to five years—the rate becomes adjustable up to a certain limit, depending on market conditions.
  • FHA loan: Geared toward low-income home buyers, a Federal Housing Administration loan lets borrowers put down as little as 3% on a house.
  • VA loan: If you or your spouse serve or served in the military, you may qualify for a Veterans Affairs loan. Under this program, the VA guarantees the loan—reducing the risk to the lender—and allows you to finance up to 100% of the house’s cost, so you won’t have to come up with any money for a down payment.
  • USDA loan: Another type of government-backed mortgage, this loan is offered by the U.S. Department of Agriculture Rural Development in towns with populations of 10,000 or less. USDA loan borrowers can have down payments as low as 0%.
  • Jumbo loan: If you live in a pricey housing market, you may end up with a jumbo loan—a mortgage that’s above the limits for government-sponsored loans. In most parts of the country, that means loans over $417,000; in areas where the cost of living is extremely high (e.g., Manhattan and San Francisco), the threshold jumps to $625,000.

 

2. What type of mortgage is best for me?

A mortgage lender should be able to answer this question once you’ve completed a loan application and the lender takes stock of your employment, income, assets, credit, debt, expenses, down payment, and other information about your finances.

3. What are your closing costs?

For home buyers, closing costs—the fees paid to a lender and other third parties that help facilitate the sale of a home—typically run about 3% to 4% of a home’s sales price. So on a $250,000 home, your closing costs as a buyer would amount from $7,500 to $10,000. The good news is some closing costs are negotiable: attorney fees, commission rates, recording costs, and messenger fees.

Your best approach is to submit loan applications with several lenders so that you can receive good-faith estimates (GFEs), which contain an itemized list of a lender’s closing fees.

4. How much time do you need to complete a mortgage?

One recent study found that closing times take, on average, 50 days. But, if you’re buying in a hot housing market, you may need to find a lender who can turn around a mortgage quickly—30 days or less.

The caveat: Some types of loans often take longer to process. The entire FHA loan process, for example, may take 30 to 60 days from the time you apply for the loan to the day you close, since the house must pass an inspection conducted by the U.S. Department of Housing and Urban Development. And if the house requires certain repairs in order to pass inspection, they must be completed before the sale can go through.

5. Do you do underwriting in-house?

Underwriting—the process in which mortgage lenders verify your assets to get a home loan, check your credit score, and review your home appraisal—can last as little as two to three days, but typically takes over a week to finish. All loans must go through underwriting before the lender can issue you the funds for a home purchase.

Some lenders do underwriting in-house, while others farm out to third-party underwriters. Though there are plenty of good lenders that outsource their underwriting, finding lenders that do theirs in-house could help speed up the process, since the underwriter would have direct access to your loan officer. (Communication between a loan officer and an outside underwriter might take longer.)

6. What documents do I need?

Proof of income and assets, personal identification, and information about your credit history are the big three. It can be a lot of paperwork, so start now by getting your paperwork in order.

7. Do you participate in any down payment assistance programs?

Need help making a down payment? There are many down payment assistance programs across the country which can help. One study found that buyers who use down payment assistance programs save an average of $17,766. The challenge, though, is not all mortgage lenders participate in these programs—but if you need down payment assistance to buy a house, you’ll need to find a lender that does.

8. Do you charge for an interest rate lock?

A mortgage rate lock is a commitment by a lender to give you a home loan at a specific interest rate, provided you close on your home in a certain period of time. This rate lock offers protection against fluctuating interest rates—useful considering that even a quarter of a percentage point can take a huge bite out of your housing budget over time.

Most lenders will offer a 30-day rate lock at no charge to you, but some lenders do charge for rate locks. This fee can be as high as 1% of your total loan amount. On a $300,000 mortgage, that means paying up to $3,000 to secure your rate—that’s not chump change.

9. Who will be the title and escrow agency or attorney?

You don’t have to leave the selection of the title company up to the lender. See how much your mortgage lender’s recommendation will cost, then shop around and see if you can save any money.

You can do the same for an escrow agency and attorney.

10. How do you communicate with your clients?

A great mortgage lender will stay in close contact with you, giving you updates on key steps in the mortgage approval process (e.g., the home appraisal and underwriting), says Yee. Additionally, you want to find a lender that you could reach easily when you have questions. Some loan officers work only during regular business hours, Monday through Friday, which can be a big disadvantage if you need help on a weekend.

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