Friday, January 1, 2021 / by Linda Maxwell
Common Buyer Questions
These are the most common questions we receive from buyers, so we've compiled them for your quick reference!
How much earnest money will I need?
The industry guideline is generally 1% of the sale price. If the seller is a lender, they may have a minimum requirement that must be adhered to. However, increasing your earnest money is a good way to make your offer more enticing to a seller.
When does my earnest money check get deposited?
Within 3 business days after acceptance unless stated differently in the Purchase Agreement. The money is held in the Trust Account by the seller's broker or by a title company, and applied to your down payment at closing. If the the purchase agreement becomes null and void, the buyer may have to wait at least 10 days to receive the earnest money refund.
How much will my mortgage be?
This amount will depend on the agreed upon sales price, how much money you put down, and whether you are financing your closing costs. Please refer to a Good Faith Estimate from your lender for details.
What kind of financing should I choose?
There are many different Conventional and FHA mortgages to choose from. A 15-year or 30-year fixed rate mortgage is desirable because of the reliability of the interest rate. However, an ARM (Adjustable Rate Mortgage) may work for some buyers who are only planning to live in the home 5 years or less. Be sure you clarify with your lender what the rate would be after the initial period (2, 3, or 5 years). Also, determine if there is a prepayment penalty if you refinance within a certain amount of time.
Should I finance my closing costs?
When should I lock in my interest rate?
Many lenders require an accepted purchase agreement before they allow you to lock in on a rate. However, some will allow a verbal lock request over the phone based on their relationship with you. Please check with your lender for details. As always, we highly recommend using one of our preferred lenders because we have a strong relationship with them and we can trust them to do a great job. Contact us if you'd like to be connected to one of our preferred lenders.
Is the purchase contingent on the sale of my current home?
If you currently own a home, determining whether your offer will be contingent or non-contingent on the sale of your home is a very important factor in the purchase agreement. If you are planning to write your offer non-contingent (without your home being sold), lender approval is required. Please review your options in more detail with our team. We also offer a Seller Success Toolkit that provides a handful of selling/buying options.
What is the Seller's Property Disclosure Statement and why is it important?
Minnesota State Law requires that most sellers complete a property disclosure statement (with some exceptions, such as an investor who has never lived in the property). This is to be honestly completed to the best of the seller's ability if they lived in the property. This is a very important disclosure to review prior to submitting your offer on the home, as there may be issues with the home on the disclosure you do not like or want to deal with. It's important to note that although sellers are supposed to complete the form in its entirety, many of them do not. If you want anything clarified, ask your agent and we'll inquire with the seller's side to try and get an answer.
Does the city require any inspections on the property?
There are about a dozen municipalities in Minnesota that have a required inspection (A.K.A. Truth In Sale of Housing, Code Compliance, or Point of Sale inspections) that the seller should have completed. Those municipalities are: Bloomington, Golden Valley, Maplewood, Minneapolis, New Hope, Orono, Richfield, Robbinsdale, Saint Paul, Saint Louis Park, and South Saint Paul. These inspection reports are important to review prior to submitting an offer, as there may be fundamental aspects of a home that do not meet the municipalities standards.
Should I consult my tax advisor about this purchase?
Yes, you should consult your tax advisor, if you have one, regarding the potential capital gains tax or tax credits. Note: any time a homeowner sellers a principal residence, they are entitled to an exclusion of gain of $250,000 for a single person or $500,000 for a married couple. The homeowner must own and occupy the residence for at least two out of the five years prior to the sale.
Please feel free to discuss any of these items in detail with your agent.