Frequently Asked Questions

Why should I use a real estate agent?

A real estate agent is more than just a "sales person."  They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home.  Due to the fast changing market, the data on available listings is not 100% accurate.  There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.

There are two types of agents, "Buyer's Agents" and "Seller's Agents".  It used to be common for all parties involved to work for the seller, hence the term "Seller's Agent".  Nowadays, you will most often find a different type of agent, the "Buyer's Agent".  If you are in the market to buy, it would be advisable to use a Buyer's Agent.  They can make recommendations on what terms and prices to offer as well as negotiating a deal with your best interest in mind.  If you happen to be working with a Seller's Agent, never disclose to them the top dollar you are willing to pay for any property.  Keep it narrowed down only to things that you would tell the seller directly.  

What is a REALTOR®?

A REALTOR® is an agent or agency that belongs to the local or state board of REALTORS® and is affiliated with the "National Association of REALTORS® (NAR).  They follow a strict code of ethics beyond state license laws and also sponsor the Multiple Listing System (MLS), which is used to list houses for sale.

 How can I figure out my debt-to-income ratio?

To figure out where you stand on the debt-to-income ratio, you must first understand the meaning of the figure.  Most lenders use the ratio 28/36.  

The first number, which is also referred to as the front-end ratio, is the percentage of your gross monthly income that you could comfortably afford to spend on your housing payments or mortgage.  This figure includes the money you spend on property taxes and insurance as well as the loan payment itself.  

The second number, which can also be referred to as the back-end ratio, is the percentage of your gross monthly income that should be spent on all long-term monthly debts combined.

Use the following guidelines to find out where you stand:

- First, figure out your gross monthly income (your income before taxes).  To do this, take your gross yearly income and divide it by 12.

- Multiply this figure by 28 percent (.28).  The amount you come up with is TYPICALLY the amount you could comfortably afford to spend on your housing payments per month.

- Now, take your gross monthly income (your gross yearly income divided by 12) and multiply it by 36 percent (.36).  The figure shown should be the TOTAL amount of money you spend on ALL LONG-TERM DEBTS COMBINED.  To get a more accurate mortgage estimate, tally up your monthly bills - which include car payments, credit cards, child support, alimony, etc. - and subtract this amount from the figure you just came up with.  However much money is left over is the amount you should truly be spending on your housing payments per month.

How big is an acre?

An acre is an area of land equal to 43,560 square feet.  For visuality purposes, an acre is most often compared to the size of a football field - not counting the two end zones, which are each 30 feet in length.  Now try to envision one square mile, which is equal to 640 acres!

What is the difference between being prequalified and preapproved for a loan?

The difference between being prequalified and preapproved is simple:

If you're prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information given was accurate and true.  

If you're preapproved, it means that you have undergone the extensive financial background check - which includes looking at your credit history, previous tax returns and verifying your employment - and the lender is willing to give you a loan.  You're APPROVED!  So, they give you a letter that states such and it is valid for a approximately 60 days thereafter.

Notwithstanding the above, you will have an accurate figure which shows the maximum amount that you are approved for.  Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.

How much money can I borrow to buy a home?

To begin, you'll need to figure out what your gross income is (before taxes) monthly and yearly.  To get a quick ballpark figure, take the yearly income of yourself - and your co-purchaser if applicable - and multiply by 2 to 2 1/2.  Most people will fall into this category.  There are other things to consider, however.  If you have a large down payment combined with little to no bills, the lender may believe that you could afford a more expensive home than the ballpark figure allows.

What is an escrow officer?

An escrow officer - also known as a loan officer - is the person that walks you through the closing process.  They are usually employed by the title company that you are working with. They are a neutral third-party, responsible for overseeing the escrow process. They typically perform the title searches, prepare final paperwork, witness the document signings as well as ensure that the transaction is executed properly and legally.

What is depreciation?

Depreciation is a decline in the value of property due to general wear and tear, or is also known as an annual allowance that helps you recover on your taxes the cost of the property.  Property depreciation occurs most commonly with rental or investment property, which allows for certain tax breaks.

What is depreciation?

Depreciation is a decline in the value of property due to general wear and tear, or is also known as an annual allowance that helps you recover on your taxes the cost of the property.  Property depreciation occurs most commonly with rental or investment property, which allows for certain tax breaks.

What is equity?

Equity is the financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home.

If you're buying a home and don't have very much money for the down payment, you may want to find out if the seller would be interested in "sweat equity".  This would allow you to perform the labor on any needed repairs and maintenence to the home, (such as outside repairs, painting or electrical work) in exchange for credit towards closing costs.