Buyer's Frequently Asked Questions

28 Facts Every Home Buyer Should Know

1. How do I avoid paying upfront closing costs?
Your Dream Town Realtor® will refer you to a mortgage broker who will be happy to pay your closing costs. However, this may affect your interest rate. Another way is to have your Dream Town Realtor® negotiate that the Seller pay your closing costs. This will ultimately be reflected in your purchase price. Either way, you are rolling your closing costs into your mortgage . . . saving about $4,500 in up-front costs on a $300,000 purchase.

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2. Is there any way to avoid paying mortgage insurance with a down payment of less than 20%?
There may be, if you take two mortgages: one for 80% of the purchase price, another for the difference between what you want to pay down and 20%. For instance, if you want to pay 10%, you'd try to get a second mortgage of 10%. Since your first mortgage is for only 80%, the lender won't require mortgage insurance.

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3. If I’m interested in a home for sale by owner, do I still need a Buyer’s Realtor®?
Yes. Having a Realtor® represent your interests is just as vital in purchasing an unlisted property as in a more typical transaction. Most "do-it-yourself" Sellers welcome Buyers' Realtors® and are willing to pay their commissions in order to make the complex transaction easier.

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4. If I have credit or debt-to-income problems or other obstacles to qualifying for a mortgage, can someone else co-sign for me?
If the property will be the primary residence of the co-signator, that person can apply for the loan and disclose the same financial information you are disclosing. If he will not be residing there - for instance, a parent helping a child buy a property - most lenders will find a way to make him liable for the debt and thereby enable the loan.

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5. Should I have my mortgage company set up an escrow account so I pay them taxes and insurance monthly, and they pay the tax bills and insurance payments when due?
Some lenders will insist on it and others will refuse. They are holding your money in an escrow account without paying interest, so it costs you a little. But it saves you a lot of trouble - and if they are late paying property taxes, which can be confusing, they pay the penalties.

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6. Do I need a home inspection on new construction?
Even though the city has seen to it that everything's up to code, and the builder or developer may give you a warranty, have a home inspection anyway. Your inspector can help you develop a list of minor repairs or corrections that need to be completed by the builder / developer either before you take possession, or within a specified time after.

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7. Are condominium or homeowner association assessments tax deductible?
No. Your interest and taxes are deductible just as in a freestanding single-family residence, but not your monthly assessments.

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8. Why do I need a Buyer's Realtor®?
When you enter the home-buying market, it is essential that you have a professional and experienced Buyer's Realtor® as a sounding board and ally. Home Sellers' Realtors® represent the Seller's interests; they are contractually obligated to work toward an optimal price for the Seller. In contrast, a Dream Town Buyer's Realtor®, as your committed advocate, is dedicated solely to your best interests and to finding your dream home. Our services are free to you, as the Seller pays all commission costs.

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9. How long does it take to process a mortgage application?
Applying for a mortgage usually takes about 60 days, but can be anywhere between 30 and 90. It usually depends on how quickly the lender can get an appraisal of the property, a credit report, and employment and income verification.

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10. When do my mortgage payments start?
Your first mortgage payment is usually due 30 days after closing - the date will be included in your closing documents.

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11. What's included in my monthly house payments?
Your monthly payment covers principal and interest on the loan, and may also include your mortgage insurance, property taxes and hazard insurance, depending on the terms of your loan.

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12. What are assessments?
Fees paid by a condominium owner to the condominium association to cover protection and maintenance of common areas, or by a homeowner in a townhome or gated community to the homeowner's association. Also the statistic used by local governing agencies to determine your property tax.

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13. What kind of mortgage rate can I get?
Depends on your financial situation, which lender you use and what type of loan you select. See Section 3, p.15 of the Chicago Buyer's Guide for more information.

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14. If my contract is not accepted, do I get my earnest money back?
This depends on the details of your contract. The contract must state under which contingencies or circumstances the buyer will be refunded the earnest money. Even then, there may be third party fees for things such as appraisals or legal costs that will diminish the amount returned.

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15. Can I get out of a contract?
Yes, depending on what contingencies are written into your contract. Talk to your Realtor® about what contingencies should be included in your contract. You also have a window of five business days for attorney review where you will not suffer any cancellation fees.

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16. What is a contingency?
Conditions - or "safety valves" - written into real estate offers and contracts to protect the buyer.

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17. Can you help me with service providers?
Yes, speak with your Dream Town consultant for recommendations of reliable and skilled service providers in your area. Your Dream Town consultant is in no way compensated for making referrals.

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18. How safe is this neighborhood?
Check out the Chicago Police Department's website for detailed information on crime statistics for the City of Chicago and for your specific neighborhood.

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19. Will this area appreciate?
Even economists don't know the answer to this one. Our home appreciation chart shows the typical appreciation on a $300,000 home with 30-year loan at 10% down and current interest rates.

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20. What does the buying process entail?
Select a Realtor® - buyers' representatives work for you, putting your best interests first.
Decide whether buying is the right choice for you - weigh advantages of owning versus renting.
Set your price range - determine affordable monthly payments based on your net worth and down payment.
Secure a lender - free prequalification followed by pre-approval then, choose the suitable mortgage for you and apply for your loan.
Negotiate your purchase - your Realtor® will help you create, present and negotiate your purchase offer.
Make sure everything is in order - legal review of contract, home inspection, property appraisal.
Close the deal - title, walk-through, closing fees, home-owner's insurance.
Move in - select a moving company, change-of-address forms, contact new service providers, etc.

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21. What are closing costs going to be?
Funds needed at the time of closing in addition to the down payment.

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22. How does the Realtor® get paid?
Real estate agents are self-employed. They make a commission off the selling price of the home only if the transaction goes through. The seller pays the commission - it is not a buyer's expense. Historically, the commission is between four and seven percent, which is split with the broker. Overhead costs are also taken out of the commission before the Realtor® is paid. In addition, any other expenses such as MLS membership fees, insurance costs, gasoline/car, etc. must be paid out of the remaining money.

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23. How much is an attorney, and why do I need one?
Attorney's fees are dependant on the specialization of the attorney and the size of the housing unit. The rate is higher for new construction as opposed to existing homes. Attorney's fees are paid at closing. Having an attorney review your contract is generally a contingency of the purchase offer that must be met.

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24. Do I need an inspector for new construction?
It is recommended to have any home you are going to buy inspected. Some lenders request a home inspection. Dream Town requires a buyer to sign a waiver if they do not want to have a home inspected. An inspector can also help you develop a list of minor repairs or corrections that need to be completed by the builder/developer before you take possession, or within a specified time thereafter.

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25. What is a good offer?
Offer an amount you feel comfortable with - that also leaves room for negotiation. Start low to give yourself leeway for the seller's counter offer. If you start too high, the counter offer may be out of your range.

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26. How low can my offer be without being insulting?
Don't worry about insulting the seller - this is business. The seller can always come back with a counter offer or refuse the offer altogether.

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27. What is earnest money?
The deposit the buyer makes along with an offer to the seller, held by the seller's Realtor in escrow until closing and applied to the down payment at closing. The buyer usually pays $1,000 with the offer and the balance within expiration of attorney review and home inspection.

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28. How are the schools in this district?
Check out our Chicago Schools section for all the information you need.

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