Here we go!
What are Closing Costs? – Closing costs are the expenses that the buyer pays to close the escrow. Most of the costs are associated with the loan like points, pre-paid interest, etc. Plan on closing costs being around 1.5-3% of the purchase price.
What does 1 Point on a Loan mean? – 1 point equals 1% of the loan amount so if your loan is $400,000, 1 point is $4000. A point can be an origination fee (fee to the lender) and/or it can be a discount point which is used to reduce the interest rate on the loan.
What is a Conforming Loan? – A conforming loan means that the loan conforms to the guidelines set forth by Fannie Mae and Freddie Mac. As of 2013, conforming loan limits are $625,000 for L.A. County and $598,000 for Ventura County. Loans above these amounts are harder to qualify for and typically have a higher interest rate.
What does Pre-approval mean? – Pre-approval means that a lender has taken your loan app, checked your credit, verified income, and determined the type of financing you will qualify for. Having this done ahead of time greatly strengthens your offer to the seller.
What is PITI? – PITI stands for Principal, Interest, Taxes, and Insurance. Those are the main elements that are considered when determining your monthly payment. Additional factors can include PMI (below) and HOA dues (below).
What is PMI? – PMI stands for Private Mortgage Insurance. If a buyer is putting down a small down payment, the lender will often require PMI (added to the monthly payment) that covers the lender’s loss in the event of a default.
What is an HOA? – HOA stands for Home Owners Association. Many of the homes in the Conejo Valley are subject to an HOA that the home owner pays for monthly.
Who pays the Commission? – The commission is paid by the seller. The buyer pays no commission to the agents involved in the transaction.
What is Escrow? – Escrow is a neutral third party that facilitates the transaction. Escrow represents no one in the transaction and it cannot provide advice including legal. Escrow is where all the money and documentation is held during the transaction.
Who pays for Inspections? – The buyer pays for any and all inspections he/she would like to perform during the contingency period.
What is a Home Protection Policy? – A Home Protection Policy is an insurance policy that the seller typically pays for the first year that covers the major systems of the house if something stops working.
If I work with a RE/MAX Agent, will I only see RE/MAX listings? No, we show all listings that are listed for sale regardless of the company. There is no incentive for an agent to sell his/her company listings over other offices listings. They all pay the same amount.
What is a Short Sale? – A Short Sale is when the proceeds of the house won’t cover the outstanding loan amount. In this case, the lender agrees to take a lower amount that is owed to avoid foreclosure. From a buyers perspective, negotiations are with the bank and the escrow period will typically take longer than a standard purchase.
What is Title Insurance? – Title insurance is an insurance policy paid for by the seller that insures that the title is clear when the home is sold to the new buyer.
How much is a Deposit? – The deposit amount is negotiable, but the industry standard is 3% of the offer amount. This is also referred to an earnest money deposit or good faith. If the buyer cancels the escrow during the contingency period, the deposit money is returned to the buyer.
Can the seller Cancel The Escrow is he/she gets a better offer? No. Once the seller accepts your offer, he/she is legally bound to go forward with the sale unless the buyer is not performing.
If you have any other questions or need help finding a home, contact me today at 805-267-9481.
