Home Buying Q&A with Carlsbad Real Estate Agent Mylene
As your buyer agent, I oversee all the steps of buying a home: previewing and showing properties, negotiating the best purchase price and terms, managing the escrow process, and putting keys in your hand. If you are interested in becoming a real estate investor, I provide tools and spreadsheets that help to calculate investment returns and determine value.
Q: How much does it cost to buy a home?
A: The rule of thumb is approximately 3% of the purchase price, not including the down payment and any up-front mortgage insurance. The major costs are the lender fees, title fees, escrow fees, and any deposits into an impound account for homeowner’s insurance and property taxes. These fees vary based on a number of factors, including the loan program and the purchase price. I include an example of fees in my article about the costs of buying a home. We can discuss your individual needs, so I can estimate how much cash you will need to purchase a home. If you are a cash buyer, you can read about Closing Costs for Cash Buyers.
Q: How much does it cost to own a home?
A: My article about the cost to own a home provides a worksheet to help you plan for your monthly bills. The main expenses are the monthly principal and interest payment to your lender, the property tax payments which are due twice yearly, and your annual homeowners’ insurance premium. You may have homeowners’ association (HOA) and/or Mello-Roos dues, and you may also have to pay a monthly mortgage insurance premium to your lender. Your utility bills depend on your neighborhood and your personal preference, but they normally include electricity, gas, telephone, Internet, cable, water/sewer, and trash. If you lived in a community with a homeowners’ association, the association may pay for one or more of these utilities.
Q: What kinds of financing are available?
A: There is a wide range of loan programs available for home buyers. The three main types of real estate loans are conventional loans (as little as 3% down), FHA loans (as little as .5% down), and VA loans (as little as 0% down). Programs that give you cash back to cover closing costs usually come with a slightly higher interest rate. Your interest rate is affected by your credit score, and the amount of your down payment. Conventional loans with a down payment of less than 20%, and all FHA loans, normally require mortgage insurance. However, some lenders offer conventional loan programs that allow less than 20% down, and no monthly mortgage insurance. If you’re thinking about buying a fixer-upper and making renovations right away, you may consider a Renovation Loan.
You also can read my articles about where to go to get a mortgage and how to get preapproved for a mortgage. Low-to-moderate income Californians may qualify for down payment assistance from CalHFA. The HomePath Ready Buyer Program provides up to 3% of the purchase price in down payment assistance if you are buying a HomePath home.
In 2015, the Consumer Financial Protection Bureau (CFPB) released a new toolkit to guide consumers through the process of shopping for a mortgage and buying a home. The Home Loan Toolkit is a helpful tool to help you plan your purchase. The CFPB also has a website called “Owning a Home,” full of online tools and resources for prospective home buyers.
Starting October 3, 2015, the loan disclosure forms are going to change. These changes are designed to help home buyers clearly understand the terms of the mortgage and the escrow and other closing costs. The CFPB offers guides to the Loan Estimate and the Closing Disclosure.
Q: What happens in the escrow process and how long does it take to get keys after our offer is accepted?
A: Escrow periods typically last 30-45 days, but this can vary depending on terms and the property. Here’s an example of the life of a typical 30-day escrow, from a buyer’s point of view:
- Week 1: Offer is accepted, escrow is opened. Buyer submits earnest money deposit to escrow. Buyer orders home inspection, and buyer may request seller to complete repairs. The lender orders the property appraisal. Buyer orders the homeowners’ insurance policy and sends policy information to the lender. Buyer signs loan authorization paperwork, which allows the lender to process and underwrite the loan.
- Week 2: Buyer receives lots of seller disclosures to review and acknowledge, which includes the seller’s property questionnaire, a termite inspection report, and a natural hazard disclosure report. Buyer also receives a packet from the escrow officer, which includes vesting and statement of information forms to be completed and returned, along with the preliminary title report. If the property has a homeowners’ association (HOA), the escrow officer will also send an HOA document package. The appraiser completes the property appraisal and sends a report to the lender. Loan processors will verify financial information, such as employment, deposits, rental history, tax returns, and Social Security number. Over the next two weeks, once the loan is processed, a certified underwriter will analyze the loan file to ensure the file meets all of necessary guidelines to approve the loan. The underwriter makes the final loan approval.
- Week 3: Final loan approval is made. Buyer signs Contingency Releases once all inspections are made, disclosures are reviewed, repairs are negotiated, and loan approval is confirmed.
- Week 4: Lender orders loan documents to be sent to escrow, and we schedule a loan document signing with a Notary. Buyer does a final walk-through of the property about five days before close of escrow. Buyer signs all loan docs with the Notary, and brings a cashier’s check (or orders a wire) for any monies due. Once loan docs are signed, loan is funded, and the title company records the deed of trust at the County Assessor’s office, it’s time to move in!
Have any questions about buying a home? Call or text me at (760) 637-7231, or send me an email.
Rent vs. Buy Calculator
California Attorney General’s Homeowner Bill of Rights – legislation effective January 1, 2013
California Mortgage Resource Directory – search for available mortgage finance programs
California Property Tax Guide – California State Board of Equalization, Publication 29
Homeowners Insurance Informational Guides – California Department of Insurance