Purchasing or selling your family’s home, investment property, or buying vacant land? You are bound to have some questions. As you begin to research you will run into a lot of different terminology you have not heard before, let’s start there! 

How much can you spend & how do you get pre-approved? 

If you have asked yourself how to go about home ownership, you are already 1 step closer. The first action to take when purchasing a property, contact a lender. A Lender is a professional, Loan Originator or Broker. Your LO will walk you through the steps in order to purchase a property. One very important step will be prepping your financial position, it can be lengthy, but it is equally rewarding.

Your LO will review your credit score, DTI (debt to income), income and employment to assess your purchasing power, and pre-approve you BEFORE looking at properties! There are various programs and loan types, with the help of your LO your journey to ownership is easier than previously thought! 

What is a mortgage and how does it work?

A mortgage is a type of loan (debt) to finance a property, it pledges real property as security for repayment of the debt under a legal contract. Most commonly, homeowners use some type of mortgage to purchase a home, in most cases conventional, FHA or VA loan types. Your lender will help you determine what is the best option for you. 

Why would you need a mortgage? Purchasing a home in cash is not an option for many people, instead of paying the entire $200,000 purchase price you can save up a down payment of say 5%, that would be $10,000 to be able to purchase along with other pre-approval factors. A lender will fund the mortgage based on pre-approval through their respective financial institution (a bank / credit union) over perhaps a 15-30 year loan length. The interest rate you receive will be determined from your pre-approval and confirmed by your LO. Interest is a whole other topic that will be covered in a later blog!

Home’s assessed value and its market value, what’s the difference? 

In short, assessed value is what your local municipality (i.e. township / city) determines your house is worth. Assessed value is sometimes referred to as the ‘taxable value’. You can call your local municipality or look online in public record to see what your home’s assessed value is. This value is what your taxes are based on. Typically, the property taxes paid on a home is equal to the assessed value multiplied by the local mileage rate.

Market value is what value potential buyers perceive a house is worth. Market Value is typically referred to as the fair market value, which is the amount an informed and willing buyer agrees to pay. In an aggressive market, it is not uncommon to see homes selling at fair market value for 200%+ of the assessed value!

What is an “EMD”?

EMD stands for ‘Earnest Money Deposit’, a security deposit towards a property you intend to purchase. When you submit an offer on a house, your real estate agent will submit that offer through a sales contract (purchase agreement), which will include details of your EMD. Your real estate agent should guide you in the direction of how much money to include on a deposit. Please note, an EMD is NOT extra money you are paying for the property, it is truly a deposit. When your offer is accepted, you need to get this money to your real estate agent within 48 hours.

Make sure any funds you are using for purchasing your home are traceable in your bank accounts. This money goes towards your closing costs on the day you close on your property. For example, if your lender says you need to go to closing with $10,000 and you submitted $2,000 as an EMD, you will only need to bring $8,000 to closing. 

How should I prepare my house before selling it?

When selling your house, TIE UP ALL LOOSE ENDS. If you have house projects going on, finish them. If your sink drains slowly, try and fix it. You will want your home be clean and decluttered so potential buyers can future cast themselves in the home. Again, allow potential buyers envision themselves on the couch watching Sunday football, or in the kitchen, hosting family dinners. Eliminate opportunities for potential counter offers from buyers by ensuring things are in good working condition, clean and updated .

When you do accept an offer from a buyer, the buyer will do a home inspection from a licensed inspector. An inspector will find all the flaws in your home, because it is there job to work for the buyer. For example, an inspector will note if your dishwasher isn’t working, if your dryer makes a weird noise, or if your roof is missing shingles. As a seller, always be transparent about any issues with your home. 

Additional Questions?

• Call: 517.740.6374
• Email: baileymollitor@gmail.com