I hear this question more than any other. And the answer is, “it depends”. There are 3 types of costs involved in buying a home: down payment, closing costs, and inspections/appraisal.
Down payment: If you buy as an owner-occupant (meaning you are going to live there full-time) the down payment on an FHA loan (Federal Housing Admistration) is 3.5% of the purchase price. If the home is owned by Fannie Mae and you use Homepath Financing it is 3%. Investors must put down 20% minimum, unless they are using Homepath, in which case the down is only 10%. If you’re really fortunate you might find a home that accepts USDA (United States Department of Agriculture) financing. USDA is for outlying areas of the valley, such as Queen Creek, San Tan Valley, Maricopa, Goodyear, or Surprise. Not all homes in these areas qualify, so check with your lending professional.
Closing costs: These will vary depending on your purchase price as there are fixed cost items as well as variable items. For example the closing costs on a purchase price of $150,000 might be 3% ($4,500), where the closing costs on a home for $80,000 might be $3,500 (more than 4%). It’s not always a total percentage of the purchase price, so be sure to ask your mortgage loan officer exactly what they anticipate them being. Most buyers these days ask the seller to pay some or all of their closing costs, which is generally acceptable with sellers. Current lending guidelines only allow investors to ask for 2% of purchase price at a maximum.
These 2 items depend on how large and old the home is, but let’s use a typical 1500-square foot newer home, as those seem to be the most popular buyer choice. Home inspections will run about $295-325, with a pool costing extra, maybe $75. Termite inspections run around $55-70. An appraisal will run about $450. These are all out-of-pocket expenses.
So let’s say you’re buying a $150,000 home, what’s your total cash outlay? Assuming the seller pays your closing costs:
$150,000 x 3.5% down payment = $5,250
Inspections w/out pool = $400
Appraisal = $450
Total cash outlay approx. $6,100
How long does it take to close?
Who’s buying the homes right now, investors, etc?
Most sellers are unwilling to accept a closing date beyond 30-45 days, which is about the about of time it takes to get a mortgage loan. If you are paying cash you can opt to close in just a couple of weeks.
Sometimes. If you are the only offer the seller may be willing to accept less than asking price. If you are competing with financed offers is where the “sometimes” comes into play. Some sellers want the highest net offer, which means that if a financed offer is higher, they may choose to accept it. Other sellers realize that with financing being such a challenge that cash truly is king and may be willing to accept a lower cash offer, perceiving that there is a much more likely chance of it closing.
I am not a mortgage lender but I do have relationships with some of the best in the business. Just ask and I’ll connect you to one of them.
A foreclosure has its own special set of rules. The main point of difference lies in the seller’s stance on requested repairs. Typically they sell the home in “as-is” condition and do not make any repairs, unless required by the mortgage lender, which is why you should always get a home inspection on a foreclosure home. Even that isn’t a for sure though. Other things to consider when buying a foreclosed home.
Will paying off a collection account remove it from my credit report? No. A paid collection will stick on your credit report for 7 years.
As a real estate professional I cannot steer people towards or away from an area, but I can be the source of the source. Buyers have had good feedback using Great Schools.
Whether you “should” or “shouldn’t” is up to you. There are several things you need to know going into the game. The amount of time it could take is variable from several weeks to several months. In a short sale you have the homeowner owing more on the home that what’s it worth, so they are working with their bank to reduce the payoff and accept the current market value. I wrote a post called What Should I Know if I’m Going to Buy a Short Sale?