Just Ask Susan


FTFP HWhat is Escrow?

Answer: When you buy your first home your financial responsibilities go deeper than just making the principal and interest payment to your lender.  You also are tasked with maintaining homeowner’s insurance and ensuring the yearly property taxes are paid.  Those two financial responsibilities can be broken down into a monthly amount and combined with your mortgage payment.  When considering your monthly payment budget, please remember that taxes and insurance could increase your monthly expenditure.  Usually taxes and insurance can increase the monthly amount by $100 to $300, and in some locations possibly more.  By adding the taxes and insurance amount to your monthly payment, you are building a reserve fund that is held in escrow by your lender.  Your lender then makes the payments for you at their due dates.

How much money will I have to come up with to buy a home?

Answer: That depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money – the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.

What are FHA, VA, and Rural Housing programs?

Answer:  The National Housing Act of 1934 created the Federal Housing Administration (FHA), which was established primarily to increase home construction, reduce unemployment, and operate various loan insurance programs.  FHA does not make loans. Rather, it insures loans made by private lenders. The first step in obtaining an FHA loan is to contact several lenders and/or mortgage brokers and ask them if they are FHA-Approved by the U.S. Department of Housing and Urban Development to originate FHA loans. As each lender sets its own rates and terms, comparison shopping is important in this market.  FHA allows first time homebuyers to put down as little as 3.5% and receive up to 6% towards closing costs.

A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.  The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.  Greenville County is a eligible location under VA loan guidelines.

A USDA home loan from the United States Department of Agriculture (USDA) loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program or Rural Housing Loan, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.  USDA loans require no down payment, you may finance up to 100% of the property value however there are guidelines and restrictions in place for Greenville County and the surrounding area.  Please check with your lender for current USDA Loan information.

What are “HUD homes,” and are they a good deal?

Answer: A HUD home is a residential property acquired by the US Department of Housing and Urban Development through the result of a foreclosure action on a FHA insured mortgage.  HUD pays the lender what is owed and HUD takes ownership of the home and offers it for sale to recover the loss on the foreclosure claim.  The property is sold at market value as quickly as possible.  HUD homes can often be a very good deal.

What is a Good Faith Estimate (GFE)?

Answer:  The Good Faith Estimate is a form provided to borrowers by lenders. It is required by law and allows borrowers to compare the rates and terms of multiple lenders when shopping for a home loan. The GFE must include a list of all fees associated with the mortgage loan and it must be provided to the borrower within three days of loan application.  The GFE will help you understand what various fees and service make up the closing costs, and what you can expect that amount to be.

Why get a Home Appraisal?

Answer: In a real estate transaction, the appraisal is a determination of the value of a house. An appraisal is required by the lender and is performed by the lender’s choice of an objective and impartial professional appraiser. The appraisal may not be the same amount as whatever selling price a real estate agent may have calculated.  It’s in the buyer’s best interest to create a contingency within the purchase contract that allows a release from the contract should the appraisal be an issue.

How do I make an offer on a home I want to buy?

Answer:  There are 4 forms (possibly 5, depending on the age of the home), that we will need to complete in order to present an purchase offer on your first home.  These documents are:

Pre Approval Letter: Borrower prequalification is the process of a lender determining if a borrower qualifies for a loan and the approximate amount of money she may qualify to receive.  Your lender will provide you with a Pre Approval Letter that shows the seller your ability to purchase.

Good Faith Money: The deposit of money into an account by a buyer to show that he or she has the intention of completing the deal. When this is done, the seller of the home knows that the buyer will fulfill the terms of the contract and is serious about towards making the purchase.

Signed Seller’s Disclosure Statement:  The state of South Carolina requires the seller of a home to provide a purchaser with a property condition disclosure statement.  This a 4 page form on which the seller provides information about various components of the home.  This does NOT take the place of a Home Inspection.

Contract to Purchase:   In the state of South Carolina there is a specified standard contract form used for purchase of real estate.  We will review all 6 pages to make sure you understand the content and prepare the offer for submittal to the seller’s agent.

Lead Based Paint Form:  This applies only to homes built prior to 1978.

So what will happen at closing?

Answer: Basically, you’ll sit at a table with your agent, the agent for the seller, probably the seller, and a closing attorney. The attorney will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you’re signing. After all, this is a large amount of money you’re committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a “good faith estimate” of how much cash you’ll have to supply at closing, and a list of documents you’ll need at closing. Don’t hesitate to ask questions.

Why should I buy, instead of rent?

Answer: A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you’ll enjoy having something that’s all yours – a home where your own personal style will tell the world who you are.

What is a short sale?

Answer: A short sale is a property that sells for less than the balance owing on its mortgage.  If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.  Not every property qualifies as a potential short sale.  A bank must agree to grant the short sale and is under no requirement to approve a short sale.

Do I need a Buyer’s Agent to buy a new construction home?

Answer: There is often a misconception that by not using a Buyer’s Agent during the purchase of new construction home you can reap the benefits of the builder not paying the Agent’s commission.  Whenever you try to save yourself that 3% commission rate, you are not reducing the cost of your home at all, because the realtor’s sales commission is taken from the builder’s profit. Also, the Builder’s on-site agent (sitting in that beautiful model home) has no interest in helping the buyer. Their goal is to get the best possible deal for the builder (their Boss), so don’t be swayed by their friendliness, whether well-intentioned or not. The seller will not give you a discount because you aren’t represented by an agent. By going into the transaction unrepresented, the builder will either pocket his savings or pay a higher commission to their sales representative.  Additionally, builders in the Upstate use a customized purchase contract that is tailored to their benefit.  Using a skilled buyer’s agent will be in your best interest to ensure you understand all the details of the paperwork and building process.

What is an Accredited Buyer’s Representative?

Answer: Simply put, a Buyer’s Representative is an advocate for the buyer.  They work for the buyer and must keep their client’s best interests in mind during a real estate transaction.  But not all Buyer’s Representatives are equal.  An Accredited Buyer’s Representative (ABR) has completed mandatory training and specialized education.  An agent with the ABR designation holds a special understanding of the needs of home buyers.  I have been an Accredited Buyer’s Representative since 2007 and specialize in guiding first time home buyers in the Upstate through the home buying process.

If I hire you as my Buyer’s Agent, how do you get paid?

Answer: Many first time home buyers wonder if they have to pay for their agent’s services.  In nearly every instance, home sellers have already agreed to pay a commission to the buyer’s agent.  I do not steer any of my clients to a home based on a commission.  I work very hard to ensure you, as a first time home buyer, find the home that is exactly what you’ve been looking for.