The 12 Most Common Home Buyer Questions In Alaska
Buying real estate is exciting and terrifying, all at the same time. There are many steps to the home buying process and each step creates a new set of questions. Knowing the answers to the 12 most common home buying questions can alleviate some of the stress that comes with buying real estate in Alaska. This article was designed to help you understand the basics of purchasing real estate, in simple steps. Buying a home may seem intimidating, but a good REALTOR® will make it much easier. They will take care of you through each step of the process, and make your experience as smooth as possible.
1.WHAT’S THE FIRST STEP OF THE HOME BUYING PROCESS?
Answer: The Mortgage Pre-Approval.
Unless you are paying cash for a house, you will need to get a mortgage. In order to know how much home you can afford, you will need to get pre-approved for a loan. This is the first and most important step in the home buying process. It tells you your how much house you can buy, your estimated monthly payments, your closing costs and the all-important interest rate. If you are unsure of which lender to talk with, please call or text me at 907-230-1992.
2. HOW LONG DOES IT TAKE TO BUY A HOME?
Answer: Depending on mortgage financing around 30 to 45 days. If you are paying cash substantially less time.
There is always the potential for extenuating circumstances, which will delay the home buying process and the timeline for finding a house varies from transaction to transaction. Once you find a house and have an accepted offer, it usually takes around 30 to 45 days to close. If you need help, call or text me at 907-230-1992.
3. WHAT DOES A REALTOR® DO?
Answer: Almost everything.
A REALTOR®, as your buyer’s representative, is your most valuable asset when buying a home. They will walk you through every part of the home buying process. They will educate and inform you of all your options. They will represent you throughout the transaction and beyond. They are your asset and advisor during the home finding process, the home buying process and after you have closed and recorded. Too often, first time home buyers will go into an open house represented by a listing licensee and buy using the listing licensee without a buyer’s representative. One thought, which is sometimes missed by first time home buyers in this situation, is make the point of having a buyer’s representative who is exclusively serving you in a buying transaction. Also, when you find a house through a For Sale By Owner (FSBO), always first have your buyer’s representative contact the seller to start off the home buying process correctly. If you need help, call or text me at 907-230-1992.
4. WHAT DOES IT REALLY MEAN TO BE REPRESENTED BY A REALTOR®?
There is a difference between a REALTOR® and a real estate agent; many people do not know this. A REALTOR® is regulated by the National Association of REALTORS® and subscribes to a strict Code of Ethics. A real estate agent is not. It is recommended that you work with a licensed REALTOR® to avoid potential problems. If you need help, call or text me at 907-230-1992.
5. HOW MUCH DO I HAVE TO PAY A REALTOR® AS A HOMEBUYER?
In most cases, you do not have to pay your REALTOR® anything to help you purchase a home. They cost you nothing in the transaction and give you the benefit of their experience and expertise. The seller agreed to pay their real estate representative a fee upon sale and recording of their home, and then that real estate representative (the listing licensee) pays the buyer’s representative for bringing the buyer and facilitating the transaction. If you need help, call or text me at 907-230-1992.
6. WHAT’S YOUR BEST ADVICE FOR FIRST-TIME HOMEBUYERS?
Answer: Trust the Professionals.
You should always carefully evaluate advice from people who do not work in the industry. Too often well-meaning friends or relatives will offer well intentioned advice on everything from the home buying process to mortgage lenders to the economy. Unfortunately, in most cases, this advice is a negative influence, which only confuses a first time home buyer. Real estate is a popular topic and almost everyone feels like they have some great insight to offer. In reality, the people who know best are those who work in the industry. Good REALTORS® have sold hundreds (maybe thousands) of properties. We know what to expect and what to look out for. Friends and relatives have only bought and sold a few homes, if any at all. Buying and selling a couple of homes does not make someone a well-rounded source of information.
Additionally, if other parts of the real estate transaction are taken into account, such as lending, home inspection, title, repair and maintenance professionals, the seller and their real estate representation, it becomes absolutely essential that a first time home buyer weight the advice of professionals against that advice from outside of the industry. I’ve seen too many first-time buyers become persuaded by well-meaning friends and family, only to be disappointed later. Be confident in your decisions and trust the professionals. If you need help, call or text me at 907-230-1992.
7. WHAT KIND OF CREDIT SCORE DO I NEED TO BUY A HOME?
Answer: Usually 620+
A 620 credit score, or higher, is recommended. As you are probably aware, a higher credit score offers better lending terms. This is an ever-evolving topic, however, as loan requirements are constantly changing. There are some lenders who will approve buyers with a 580 score, sometimes even lower, but this can come with a higher cost. Your loan officer will be the best source to give you a current answer for today’s lending requirements. If you need help with finding a good and trustworthy lender, call or text me at 907-230-1992.
8. ARE THERE SPECIAL HOME BUYING PROGRAMS THAT I SHOULD KNOW ABOUT?
There are great home buying programs to research. The main ones would be VA loans, USDA Rural Development loans, and FHA loans. Knowing the difference between these loan types is very important. Other local options would include the Mortgage Programs with Alaska Housing Finance Corporation and special programs for Alaska Natives. There are also down payment assistance programs under certain conditions. If you need help, call or text me at 907-230-1992.
9. HOW MUCH MONEY DO I NEED FOR A DOWNPAYMENT?
Answer: It depends on your loan type, but be prepared for at least 3% to 5% down, if you intend on occupying.
The most common answer is 3% to 5% of the purchase price. FHA loans require a 3.5% down payment. Generally, conventional loans require a 5% down payment. Veterans are usually eligible for a VA loan, which requires no money down. USDA Rural Development loan are based on income eligibility and also do not require any down payment. If you need help, call or text me at 907-230-1992.
10. WHAT OTHER FEES ARE THERE, BESIDES THE DOWNPAYMENT?
Answer: Mainly loan origination and closing costs.
The down payment is usually the largest cost associated with buying a house. Lending fees are the second largest costs to homebuyers. Most lenders will charge 1% of the loan amount for loan origination fees, depending on the loan type. Your loan officer will be able to help you determine how much you can expect to pay towards loan origination, prepaids and closing costs. If you need help, call or text me at 907-230-1992.
11. WHEN DO I GET THE KEYS?
Answer: At recording
Under normal circumstances, you will get the keys at the recording. In the Alaska, we have a 2 day period for closing and recording. This means closing happens on one day and recording upon the next. A closing typically takes about an hour. On the next business day after closing, the lender will fund the loan, after which, the title company will record the transaction. After this, you will receive the keys and take possession of the real estate. If you have a Friday closing and the loan cannot fund until Monday, you may not get the keys until Monday. Make sure to coordinate your closing to get the keys on the day you need. If you need help, call or text me at 907-230-1992.
12. WHAT SHOULD I KNOW ABOUT THE HOME BUYING PROCESS?
Answer: Your REALTOR® will answer this question
Suffice to say, most home buyers think that the moment they make an offer they are locked into the home buying process and may be putting their earnest money deposit at risk.
The home buying process is counter intuitive for a buyer. As an example, buyers search until they find a house that meets their needs and expectations. With their buyer’s representative, they put an offer together and send it to the sellers.
Are the buyers now buying the house?
Typically, the best answer is “no”.
Yes, the intent to buy the house is there, but this is the first stage of the home buying process. An offer is just an offer until there is acceptance by sellers.
Before we discuss acceptance, let me touch on two other points.
When making an offer, there is also the possibility of competing offers from other buyers. This, of course, is not desirable for any buyer as it may drive the price up. All buyers need to be aware of this.
Too often, I have had buyers really like a house, but decide to think about it or talk to family and friends about it. The problem is such a delay in an active market can result in two undesirable results. Another offer has been made during that time of consideration and now it is a competitive offer situation which requires the buyer to give their highest and best offer without any room for offer negotiation in order to come into the transaction. Or another offer has come in, it was accepted and the listing has pended. The buyers are just too late to do anything.
Regarding acceptance, once buyers have sent their offer to sellers, the sellers have three options. The first and best is to accept the offer completely. The second is to reject the offer. Buyers should avoid this result as it may make coming back with another offer weak and tentative.
The third is sellers send back a counter offer. When a counter offer is the result, then, in most instances, both buyers and sellers reach an agreement through the representation of their REALTOR®.
So now that there is an accepted offer, are the buyers buying the house? Some people will tell you “yes”. I will tell you “maybe”.
The reason for that answer is that we still need to complete the home inspection, appraisal, well & septic, if there is one, resale certificate, if there is one, and title preliminary report.
And now a few thoughts on buyers’ earnest money deposit.
Earnest money is a “quid pro quo” which means something for something. It confirms the purchase and sale agreement. It is the announcing of a buyer’s good faith to complete the transaction. An earnest money deposit can be forfeited, if there is a buyer default.
When I act in the capacity of a buyer’s representative, I tell my buyers that earnest money is almost always required to be deposited with the offer. I also make sure that is the buyer’s representative’s brokerage which holds the earnest money deposit in their trust fund. This is generally an amount of 1% of the purchase price, unless it is stated on the listing. A personal check is then written to the buyer’s representative’s brokerage and the check is deposited in the trust fund and cannot be disbursed without the buyer’s knowledge and permission.
Do you have a real estate question that you would like answered? Feel free to contact me call or text me directly at 907-230-1992, or leave a comment below for others to answer as well.
Remember, a good REALTOR® is your best source of information when buying a home. Once you have a REALTOR® that you trust, start asking as many questions as possible. They will gladly inform and educate you through each step of the home buying process.