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What is Earnest Money and How Much Do I Need?

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So, what is earnest money?What is Earnest Money and How Much Do I Need?

Earnest money is a good faith estimate that buyers put down when they make an offer seating they are serious about buying the property and they’re willing to put money down on it. It’s basically a deposit so that the seller cannot accept any other offers from other potential buyers. You’ve put money on the deal, you are serious about buying, and the seller needs to honor the offer until or if something else happens to change the offer or the transaction.

How much should we put down?

This really varies because it depends on your current situation, the price of the home, and the negotiated offer. In the past, buyers can legally put down anything they want, including less than $500, and IOU, or even personal property. While this is not done any longer, it still could be legal but, other buyers may put down higher downpayments, which look more attractive to a seller. If the seller is reviewing multiple offers, they’re more likely to choose an offer that has a higher down payment or earnest money deposit. A good rule of thumb is anywhere from 1% to 3% of the asking price of the home. This could mean as little as $1000 or as high as $10,000, or even more.

When does it get deposited?

In our NW Indiana real estate market, we have a couple of different ways it can be deposited. The earnest money check, cashiers check, or money order needs to be presented with the offer or at least a copy of the check. This shows that the buyer is serious about the purchase and is willing to put down money. However, that does not get cashed or deposited until either three days after mutual acceptance or three days after approval on the home inspection. The money is typically held by either title, escrow, or the real estate brokerage of the buyer’s agent. It gets deposited into an escrow account or mutual fund account and is credited toward the purchase of the home on closing. Both are negotiable.

Can you get your earnest money back?

There are a couple of reasons you would want to get your earnest money back. If, after the inspection, the report is not up to your standards and you choose to terminate the transaction based on the inspection, you can get your earnest money back. The expected price range, the buyer can get the earnest money back. If they simply pull out of the deal without a reason or without negotiating with the seller, the earnest money could be lost, but a great buyers agent will typically find a way to get the earnest money back should the buyer change their mind.

The earnest money is really a security deposit for the seller. Should the buyer back out for lamer reasons, the seller now has to read list of the property, put it back on the market, advertise it again, and go through the entire process. If the reason for backing out of the transaction is not a legitimate one, the seller is legally entitled to that earnest money for their lost time and emotional stress.

Earnest money is really a major part of the real estate transaction. Even if you’re going for a zero down or low down payment home loan, this money will be out-of-pocket as will your home inspection. It’s important to have a little bit of money set aside for these funds when buying a home.

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More Information for Buyers:

What Comes with the House?

How to Be Your Mortgage Lender’s Best Client

What is the Seller’s Disclosure Form?

5 Hidden Costs to Buying a Home

3 Things to Consider When Buying a Beach Home

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It’s no secret that buying a beach home is something that many people dream about. As with all home purchases you want to be diligent and ensure you are doing your research prior to closing the sale, however, there are some things that you want to pay extra close attention to when it comes to buying a beach home.

Is it weather-proof?3 Things to Consider When Buying a Beach Home

As with all coastal towns, ensuring that your home and city are both as weather-proof as possible is a must. While we always hope for the best and never plan for natural disasters to strike, protecting your investments against such horrors could save you from losing your home completely. According to FEMA using concrete as well as naturally durable wood are the best building supplies to use when constructing a beach home. An extra precautionary measure is to purchase a home on stilts, this is a great way to protect your home from flooding.

Is the roof new?

Checking on the condition of a roof should be considered in any home sale, but especially in the sale of a beach home. Most coastal homes will experience much harsher weather than homes that are further inland such as heavy and hard rainfall and high-speed winds. Purchasing a home with a newer roof is always suggested, a bonus is if you find a home with a metal roof as these are generally the most wind-resistant and thus provide a longer life before needing repair or replacement.

How close to the water is it?

It’s no secret that most people searching for a beach home want to be as close to the water as possible. This does help protect your investment in some ways such as ensuring that you will have great resale value, not to mention exceptional views, however, the closer you get to the water the higher your chances of flooding become.

The closer to the water you get generally the higher your insurance premiums will be for flood insurance and you may find yourself spending more in repairs than if you were to be further off the coast. Weigh the pros and cons prior to closing to see if you want to live as close to the coast as possible or would rather hang back a ways. As mentioned above, purchasing a home on stilts is a great way to help protect your home from the damages caused by flooding.

As long as you do the needed research and weigh all of the pros and cons when choosing your home, you are sure to end up in a home that you love. Regardless of if you choose to purchase a home right next to the waves, or decide taking a leisurely stroll to the water is a better fit, the Carolina Coast provides it all.

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5 Hidden Costs When Buying a Home

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5 Hidden Costs When Buying a Home

It goes without saying that purchasing a home isn’t exactly cheap, but how much does it really cost? While it varies slightly on each individual sale there are many “hidden” fees that buyers are often unaware of. When acquiring your pre-approval for your home loan you are more than likely aware of your down payment and your mortgage amounts, however, what other costs should you plan on being responsible for? 5 Hidden Costs When Buying a Home 

Closing Costs

One of the more common costs you may have heard about is closing costs. In some cases the seller will pay for a portion or all of the closing costs, however, it is often the buyer’s responsibility. In general closing costs range from 2-5% of the home’s value. So what exactly are the closing costs? Closing costs consist of a multitude of little fees that are bundled into one lump sum such as title insurance, recording fees, origination fees, notary fees, etc.

Earnest Money

Prior to the closing of your sale you may also be asked to provide Earnest Money to the seller. Earnest money is a way of showing the seller that you are serious about the purchase, should you decide to back out of the sale, oftentimes your earnest money will be forfeited. While it does varry, generally speaking earnest money will range from $500-$1,500.

Appraisals and Inspections

Appraisals and Inspection are nearly always the responsibility of the buyer. While in some cases you may be given the option to forego the inspections and thus save the fees, this can lead to problems or repairs down the line that could have been avoided or tended to if the inspections were to be completed. Generally, there are three different inspections that should be completed, a home inspection, a pest inspection, as well as a home appraisal. Combined these average between $700-$1,000 in total pending on where you are buying a home.

Interest Rates

Interest Rates are a hot topic when it comes to buying a home and sadly many home buyers settle for a higher interest rate just to get a home even if it means throwing money down the drain. Even 0.5% difference can be huge when it comes to buying a home and will either cost or save you tens of thousands of dollars over the life of your loan. Be sure to discuss your interest rate options in-depth with your loan adviser to ensure you aren’t paying more than necessary.

Homeowners Insurance

Congratulations, you’ve purchased your home! But did you forget that you will be required to maintain homeowners insurance? While this doesn’t amount to much, your mortgage lender will require that you have homeowners insurance for the life of your loan. This can be as low as $20/monthly and go up to much higher variables pending on the type of insurance you require or the value of the items you’d like to have insured within your home. You can also include this and your property tax with your monthly mortgage payment.

Whether you are a first time home buyer, buying a second home, downsizing or upgrading, be sure to think through all of the hidden costs that might be associated with your purchase and plan accordingly.

4 Important Questions to Ask Your Home Inspector

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4 Important Questions to Ask Your Home Inspector

Purchasing a home is the single most important purchase you will make in your life so it only seems right to ensure that you follow all the steps carefully when doing so. While most home purchases will require you to have an appraisal, in some cases you are given the option to waive a home inspection. While it may save you a few hundred dollars to skip the inspection, it could in turn end up costing you thousands upon thousands of dollars down the line. While having a home inspection completed will be helpful regardless, there are a few questions you should be sure to ask your inspector in order to get the most out of your inspection as possible.

Ask About Structural Defects

Having an honest and well-rated home inspector is ideal and will give you the confidence that there aren’t any major problems that may be underplayed on the report, however, if any of the following are found during your home inspection be sure to have them addressed immediately as they could cause both health and safety hazards down the line: Mold of any kind, Lead Paint (be sure garages, mud rooms and even attics are also checked), Structural defects, or Roof Leaks (leads to mold problems). These are all serious problems and you should never move forward with a home purchase without either having these problems addressed/fixed or be sure to have full knowledge of the risks they may cause.

In addition to the above mentioned potential problems, there are a few questions you can ask your inspector to ensure you not only understand your report, but that you know how to move forward efficiently with your purchase. The top 4 questions to remember when having your home inspection completed are as follows.

Normal Wear and Tear

Which problems on the home inspection report are caused by normal wear and tear? This may seem simple, however, what may look like a big problem to you, the buyer, may actually just be caused by continuous use, in addition, it may look like there are dozens of “problems” on the report when in reality some things may just be a little worn from use and not in need of immediate repair due to damages. By prioritizing what is simple wear and tear your “fix it” list will diminish.

Is there a Home Warranty?

Are there any home warranties being transferred? Many homeowners purchase a home warranty policy, in some cases, this warranty can be terminated after the sale of a home but in other cases the warranty can be transferred to the new owners for a set length of time. Regardless of if the warranty is being terminated or transferred, ask to get documents of all the home warranty repairs so you can see what has been serviced and when-this will allow you to get an idea of any repairs that may be coming up soon and their potential cost through a warranty contract.

More: How to make the most of your home inspection

Recommendations

Can you recommend an expert for this? If you see a large problem or costly repair on your home inspection, ask your inspector if they have an expert in that specific field that they can recommend. While most home inspectors are very knowledgeable, sometimes it helps to have an expert take a peak at a potential problem to better educate yourself of the problem, repair and cost.

Safety Issues

Are there any safety hazards? This could mean many different things including potential gas leaks, mold presence, bad electrical wiring, water leaks in the attic or under sinks, etc. all of which can cause extreme safety hazards. In addition to a safety hazard, these things can also cause problems when it is time for your loan to be approved for underwriting, so ensure that if these problems are present, they are all repaired prior to your underwriting to avoid your loan from not being approved.

No home is perfect, so even with a good inspector, a brand new build, or a fully renovated home, you are bound to have a few hurdles to jump, the key is understanding when to jump and how high. Once you’ve found the house you want to call home, check reviews, and ask friends, family or your realtor if they have any recommendations for a great home inspector.

More: What to Expect at the home inspection 

Call us for recommendations on reliable and trustworthy home inspectors in Sunset Beach NC. We want you to love your home long after the purchase and understanding the home inspection and your property will give you peace of mind.

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Is now a good time to buy a house?

Top 10 things all first time home buyers should know

Is Now a Good Time to Buy a Home?

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Is now a Good Time to Buy a Home?

Real estate has been a big topic within the past few months and seems to be a part of nearly every conversation you overhear and is even being discussed in many news outlets. With the current global pandemic, unemployment at an all-time high, business closures and social distancing, there are many people who are facing the question, should we still be buying a house? While the process in itself may be different, luckily now is actually a great time to buy and many people are starting the home buying process.

Contrary to what some may believe, surprisingly the housing market is booming. The amount of both loan and refinancing applications have nearly doubled as buyers and homeowners try to take advantage of the current interest rates. Across the country we are seeing lower interest rates than we have seen in the last 50 years, making it reasonably understandable as to why so many people are still deciding to move forward with purchasing a home despite COVID-19. Renters who have been on the fence about buying are suddenly back in the market and ready to commit, millennials who were “waiting” for a market crash are now purchasing homes, retirees are purchasing their dream home, families are purchasing the perfect homes to raise their children, across the board, more homes are being sold now than prior to the pandemic and at a much faster rate.

More: How to Buy a House During a Pandemic

Another common fear currently circulating our media is the risk of purchasing a home that will instantly crash in value and turn you upside down in your loan. While there is no way to say with complete certainty if this will happen or not, there has been a steady rise of home prices and valuation in nearly all states. With the current market, it is expected that the home values will continue to rise offering buyers nearly immediate equity with their purchases.

While many people are wanting to take advantage of the current interest rates, the standard approval process is still intact and specific standards need to be met. Regardless of the rates, they are only available for those who qualify and are not being given to every applicant. Those with bankruptcy, poor credit, large collections, late credit card payments, foreclosures and evictions, may have a hard time gaining approval from a lender. Now is a great time to start monitoring and improving your credit if needed so that you can work your way toward owning a home with a locked-in rate for the term of your loan.

More: Top 10 Things First Time Home Buyers Should Know

With rates at an all-time low, a hot market, and the expectation for home values to rise, there has never been a better time to buy a home.

 

Top 10 Things First Time Home Buyers Should Know

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Buying a house is a huge deal especially when you are buying your first house. This a major and exciting purchase not to be stepped into lightly. It is best to know everything you can about the home buying process and the current local market before you make that big exciting purchase.

Here are some key things that are important to know when purchasing a home:Top 10 Things First Time Home Buyers Should Know

  1. What is your home budget/ What can you afford?- The spending limit of what you can afford and what the bank will approve you for can be two different things. In some cases the bank will pre-approve you for a number that will stretch your budget to its tightest point or even maybe go over it. It is wise to sit down and calculate your current monthly expenses minus rent and utilities you are paying for. Think of items like groceries, kids sports programs, insurance, vehicle payments, internet, gas, etc. Calculate all these expenses and then subtract them from your monthly income don’t make the mistake of stopping on this number as what you can afford now you need to subtract some money to put into savings for emergencies and home repairs/upkeep. Now you have a good number of what kind of payments you can afford to make on a home.
  2. Pre-Qualified or Pre-Approved?- these are two very different things and many times first time buyers go out shopping with pre-qualification thinking that the number is locked in when it is not and the number drastically changes when officially doing paperwork. Pre-Qualification is an educated unofficial guess of what you may be eligible for pre-approval is what you want. In the pre-approval process your credit score and debt to income ratio are checked giving you a more solid number and a better bargaining tool when you make an offer.
  3. Credit Score- Find a company that will give you a free copy of your credit report. Yes the mortgage lender will pull a copy when obtaining pre-approval but it is good to know what is on your report before applying and shopping for homes. If there is any incorrect information on the report it is easier to get it fixed before the loan process than when you are in contract on a home.
  4. Top 10 Things First Time Home Buyers Should KnowType of Mortgage-Mortgages and financial jargon are confusing to a large number of us. It is very important that you ask every question you can possibly think of to know what mortgage is best for you. A great broker will make sure to ask plenty of questions to get to know your financial situation and find the best loan for you. Factors that will determine the best mortgage for you are; your current financial situation, if you financial situation will change over the next five years, if your income is steady or fluctuates, and how long you plan to stay in the home.
  5. Documents Needed- when applying for a loan they will want to look at: W-2’s, pay stubs, bank statements, list of assets
  1. Reasonable Offer- it is important to have a reputable buyers agent on your side. They can help you save money and know just how much is a fair offer on a home. They know the current market and many owners have listed homes above market value. You don’t have to offer list price to purchase a home. They can also advise you should you enter a bidding war or counter offer.
  2. Inspection- this is one of the most important parts of buying a home. Just because a home looks good to the eye does not mean it is in perfect condition. Many homes loans put in an inspection contingency for a reason. Always pay the money and get a home inspection you don’t want to find out there is a huge problem you are stuck fixing all on your own that you didn’t know about.
  3. Purchase Agreement- this is the offer that you write up. This includes what you will pay for the home, any contingencies, and anything that you would like to see stay in the home like appliances or even the owners kitchen table. It also states who pays what amount of the closing costs, how much earnest money is being paid, commission that goes to agents, etc.
  4. Insurance- to get approval for your mortgage you will need to contact an insurance agent and secure home owner’s insurance sometimes this cost can be added into the mortgage payment.
  5. Closing Costs- one of the top questions asked by buyers is “what are closing costs?” Closing costs are the cost of putting together closing documents, taxes, and signing agent to make the purchase of the home official. This cost should be included with you pre-approval papers.

For more helpful information on the home buying process or Sunset Beach NC real estate please browse our website or contact us.

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