How Does the Home Buying and Escrow Process Work?

Are you buying a house for the first time? If so, you might be wondering what you can expect to happen during the home buying and escrow process.

Here is a brief outline from a real estate agent in Alpine, TX about how that entire process works.

Step 1: Disclosures, inspections and credits

The very first step after the buyer and seller agree to a contract is to go through the disclosures and inspections.

The buyer will make a deposit of earnest money with the seller’s brokerage, an escrow agent or an attorney, depending on the terms of the contract. The buyer then reviews and signs any disclosures involved with the contract. These disclosures vary based on the type of property, but will include items such as known flaws with the property, necessary repairs or improvements and potential environmental hazards on the property. All of these disclosures will factor into the contract price.

Next, the buyer must arrange for inspections on the property in accordance with the terms of the contract. This is important for the buyer—the inspection could reveal hidden flaws about the property that make it unappealing or unsafe, and if that is the case, the buyer will be able to back out of the deal without having to forfeit their earnest money.

After inspections, the buyer can either ask the seller for repair work, ask for repair costs to be worked into closing cost credits or ask for a reduction of the price of sale to cover the cost of the repairs.

Step 2: Mortgage

The mortgage process is usually the most stressful part for new property buyers. It’s important to begin it as early as possible to give the lender plenty of time to complete the paperwork. Be ready to produce lots of documentation, including various bank statements, loan information, tax returns, pay stubs, contact information of your employer, explanations of credit inquiries, explanations about large deposits or cash gifts that fall outside your regular income and any other matters that could be material to your financial situation.

After reviewing all of this information, your lender will make their approval decision, and if you’re approved you’ll receive a loan commitment letter that includes the lender’s statement of willingness to fund the mortgage, granted you meet certain conditions.

The lender will usually order the appraisal, and if it comes in below the purchase price, the lender can decline to approve your loan unless the seller is willing to change the purchase price, or you change your down payment amount. The lender will also submit a request for title commitment to a title company, while you are responsible for purchasing homeowner’s insurance coverage and any necessary hazard insurance coverage.

Step 3: Closing

The final part of the transaction is the closing. You’ll submit your final loan documents to the escrow agent, and will then attend the closing at the title company, or the office of an escrow agent or closing company. You’ll sign all the documents, pay the remaining money of your down payment and closing costs, receive the deed and keys and take possession of the property.

For more information about how these processes work, contact a real estate agent in Alpine, TX!

What Credit Score Do You Need to Buy a House?

You want to buy a house, but you already know that your credit score is on the poor side of the spectrum. The good news, though, is that you might still qualify for certain types of home loans, as different types of mortgages will vary in the minimum credit scores they are willing to accept. So, what range should your credit score be in before you even think about buying a house? Let’s ask a real estate agent in Alpine, TX!

Credit score ranges

First things first, let’s look at credit score ranges. In the United States there are three credit reporting agencies (TransUnion, Experian and Equifax), all of which individually grade your credit history on a range from 350 to 850. Since not all creditors will report to all three, your score from each credit agency will be different. Keep in mind that a score of 700 is generally considered good, while a score below 620 is generally poor:

  • 740 and higher = great credit
  • 680-739 = average credit
  • 620-679 = fair credit
  • 580-619 = poor credit
  • 500-579 = bad credit

FICO score

There are many steps to the home loan process, but checking your FICO score is the first step a mortgage lender takes when checking if you qualify for their loan. Keep in mind that although there are a number of factors that play into home loan qualification, your credit score is the most important one. So, what is the minimum credit score a person needs to purchase a home? The answer depends on the type of home loan you qualify for.

Here are the typical average minimum FICO scores by mortgage types:

  • Conventional loan: 620 and up
  • FHA 203k loan: 620 and up
  • USDA loan: 640 and up
  • VA loan: 620 and up (some lenders will approve a score of 580)
  • FHA loan: 580 and up

Minimum credit score to get a mortgage loan

First time homebuyers with poor credit ratings may still qualify for an FHA loan, as these loans have lower requirements than other loan options. FHA loans are backed by the Federal Housing Administration, but the FHA doesn’t issue loans itself. What they do is insure them in case the borrower defaults on the loan at any point. It is done this way to reduce the risk of the lender accepting a lower credit score to buy a house.

For an FHA loan with the lowest credit requirements, the borrower must have a score of at least 500 with a 10 percent down payment (this is not typical). The average (and most likely) FHA loan goes to borrowers with a 580 or higher credit score with a 3.5 percent down payment.

In general, your credit score will affect the interest rate you can get. For instance, someone with poor credit will have higher mortgage rates and increased closing costs, and therefore a higher monthly payment. And the higher your credit score, the lower all of this will be.

Contact Carpenter Real Estate today to work with a phenomenal real estate agent in Alpine, TX!

Why Should I Hire a Real Estate Agent?

A natural first step for many people about to enter the real estate market is to find a good real estate agent in Alpine, TX. This all-important step comes with a huge number of benefits—namely having someone on your side who is well-experienced within the market. It’s not every day you buy or sell a home; for a real estate agent, however, this is an everyday occurrence!

Buyers or sellers who decide to jump into the market without an agent might be fine at first, but when it comes down to actually facilitating a sale, they’re quick to become lost. Working with a real estate agent from start to finish is a great way to cover all of your bases and give yourself peace of mind when it comes to this life-changing experience.

Filtering Out the Spam

There can be hundreds of home listings within a 10- or 20-mile radius of you. How do you know which ones to check out, versus which ones to pass up? More than just narrowing down by price, a real estate agent will hand-select potential homes that are ideal for you based on a number of traits. From nearby schools, to amenities offered, to locale and more, an agent will go through the trouble of filtering out unworthy homes, so you can dedicate your time to looking at true prospects.

As a seller, this same benefit applies. Don’t waste time entertaining buyers who aren’t ready to make a serious offer or ones who want to lowball you and see what happens. An agent can be your mouthpiece, turning away these types of interactions so you can sit down with serious buyers only.

Understanding Cost

Whether you’re a buyer or a seller, understanding the pricing game is crucial. When buying, you need to know things like the appraised value of a home, its sales history or the property taxes paid on it over the past year. As a seller, you’ll want to know comparable home values in your area, appraisal value and what break points people stop searching at. All of these variables factor in how much you should offer on a home or how much you should list your home for. A real estate agent in Alpine, TX is your key to getting this information.

Paperwork Duties

Buying or selling a home is a process riddled with paperwork. Unless you want to thoroughly read every single form and try to understand which forms are needed for specific situations, it’s best to put this task on a real estate agent. They’ll provide you with the right forms in a timely manner, so you can move the buying or selling process forward swiftly and accurately.

Answering Your Questions

Both buying and selling are scary prospects! Above all else, a real estate agent will quell your fears by answering any questions you have or providing insight into your decisions. Think of them as a Sherpa who can lead you down a positive path. With a good agent on your side, you’ll avoid the potential pitfalls of a complex, complicated process.

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