Here are the seven most frequently asked questions I get asked during a transaction:
1. What is escrow? Quite simply, escrow is the neutral third party that holds the money and documents for a transaction until every contingency in the contract has been fulfilled. They then transfer the money to the seller and the title to the buyer. The title company is most often the same as the escrow company.
2. What is earnest money? Earnest money is really just a good-faith deposit that a buyer puts down to hold the house while they’re going through the inspection and financing processes. Should something go wrong with either, the buyer is entitled to get that money back.
3. How long will it take to get my loan? The loan process usually takes between 30 and 45 days, depending on how busy your lender is and how strong your qualifications are.
4. What is PMI, and how do I avoid it? PMI is private mortgage insurance, which the buyer pays for to insure the lender against default. The way to avoid it is to put down 20%. By doing so, you eliminate the PMI requirement lenders have.
5. What are discount points? Discount points are basically prepaid interest. One point equals 1% of your mortgage amount. If your mortgage is $200,000, one point equals $2,000. If a buyer pays a point, it lowers the interest rate from, say, 5% to 4.9%.
6. When do I transfer utilities to my name? I always say to call the utility companies one week before transfer and let them know when the transfer date is and that you want those utilities in your name by that date; you don’t want an interruption of service that causes a big hassle for you. Now, the water and sewer are slightly different—you have to wait one business day after transfer to get the water and sewer put into your name.
7. Do I owe federal income taxes on the sale of my home? For now, thankfully, the answer is no. You don’t owe federal income taxes on the sale of your home as long as it is your primary residence, which means that you’ve lived there for the last two years.
Hopefully you found this list informative. If you have further questions, please feel free to reach out to reach out to me. I’d be happy to help.