Frequently Asked Questions
First, you need to know how much you can borrow. Knowing how much home you can afford narrows down online home searching to suitable properties, thus no time is wasted considering homes that are not within your budget. (Pre-approvals also help prevent disappointment caused by falling in love unaffordable homes.)
Second, the loan estimate from your lender will show how much money is required for the down payment and closing costs. You may need more time to save up money, liquidate other assets or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.
Finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling their home.
Most real estate agents will require a pre-approval before showing homes – this is especially true at the higher end of the real estate market; sellers of luxury homes will only allow pre-screened (and verified) buyers to view their homes. This is meant to keep out “Looky Lous” and protect the seller’s privacy. What’s more, by limiting who enters their home, sellers are given extra security from potential thieves trying to case the home (like identifying security systems, locating expensive artwork or other high-value personal property).
From start (searching online) to finish (closing escrow), buying a home takes about 10 to 12 weeks. Once a home is selected an the offer is accepted, the average time to complete the escrow period on a home is 30 to 45 days (under normal market conditions). Though, well-prepared home buyers who pay cash have been known to purchase properties faster than that.
In sellers’ markets, increasing demand for homes drives up prices. Here are some of the drivers of demand:
- Economic factors – the local labor market heats up, bringing an inflow of new residents and pushing up home prices before more inventory can be built.
- Interest rates trending downward – improves home affordability, creating more buyer interest, particularly for first time home buyers who can afford bigger homes as the cost of money goes lower.
- A short-term spike in interest rates – may compel “on the fence” buyers to make a purchase if they believe the upward trend will continue. Buyers want to make a move before their purchasing power (the amount they can borrow) gets eroded.
- Low inventory – fewer homes on the market because of a lack of new construction. Prices for existing homes may go up because there are fewer units available.