Buyers FAQ

 Most Mortgage lenders perfer a credit score of 600 or higher.

Factors that contribute to credit score are

· 35% Payment history

· 30% Amount owed

· 15% Length of credit history

· 10% Type of credit

· 10% New credit

Lenders need to see 20% of the property’s price to avoid paying private mortgage insurance. Most traditional loans require a down payment of 5%. Veterans may qualify for a VA loan and don’t require a down payment. Consider shopping around for mortgage lenders and research loan programs you may qualify for.

For lenders, it’s all about assessing the risk. Risky borrowers may be charged more than less risky borrowers. Your credit score is a way of measuring the risk. The amount of down payment you have saved is another factor. The more, the better! The type of loan matters as well. A primary residence defaults less than a vacation or second home. Make sure you are “shopping” for a lender to get the best deal!

This is similar to a rent deposit. It’s made in good faith to show to the seller that the buyer’s offer is serious and legitimate. It protects the seller if the buyer backs out. Usually, the amount is 1% to 3% of the sale price. At closing, it’s applied as a credit toward closing costs. If the deal falls through for any reason other than the contingencies(link) listed in the buy/sell agreement, the seller can keep it.

The answer is yes, but you would lose the earnest money (link to earnest money definition) and may face legal consequences if it’s not outlined in the buy/sell agreement.

A home inspection deals with the condition of the home and to determine what repairs are necessary. The goal of an appraisal is the determine the fair market value for the lender. Both are conducted by a licensed professional. The buyer typically pays for them at closing.

1. You can contest the appraisal and request a new one from a different appraiser.

2. Pay the difference between the amount the lender is willing to finance and the offer price.

3. Negotiate with the seller to reduce the price.

4. Terminate the agreement.

This protects the owner from claims against the home before they owned it like taxes or bills from contractors. There are two types.

1. Lender title insurance is usually required during the selling process. It protects the lender from claims made on the home.

2. Owner title insurance is optional. It will protect you from issues with the title for the duration of ownership.

The probability is very low. Sellers are taking a big risk when offering this as possible financing. The terms may be less favorable for both parties. In most cases, the buyer cannot obtain a traditional loan due to low income or bad credit.

This is the sale of a home where the proceeds from the sale are less than the debt secured by liens against the property. In order to avoid foreclosure, the seller will do a short sale. These homes may be in less than favorable condition.

Also known as a REO, these are properties that are owned by a lender. Most of these are sold “as is”. Foreclosure is the legal process where the lender has attempted to recover the defaulted loan amount and was unsuccessful. They then take possession and sell the property.