Buying FAQs

The very first step is to talk to a lender and get preapproved for a mortgage. This answers the most important questions up front, such as what price range you’ll be looking for as well as what types of loan programs and even types of property you qualify for. Your lender can give you an idea of what to expect for closing costs, and how much, if any, reserve savings you might need for the type of property you want.

Loan programs vary based on your credit score, and a good lender can sometimes help you make small changes to your existing debt in order to qualify for a higher purchase price or different loan program you might not have qualified for otherwise.

I have a short list of lenders who I personally use and who answer my calls outside of normal business hours, so reach out if you need any recommendations.

Probably a lot less than you may think. If you’re a qualifying veteran, you probably already know that you’re likely eligible for a 0% down mortgage that even rolls the closing costs into the loan! If you’re a first-time homebuyer with a credit score above the threshold, you might qualify for one or more programs that only require a 3.5% down payment. Aside from that, the lowest you’ll probably qualify for is 5% for a “conventional” mortgage.

The National Association of Realtors (NAR) “Home Buyers and Sellers Generational Trends Report” provides a breakdown of down payment used by buyers during the year. 2020’s showed that almost a third of all buyers used a down payment of 5% or less, 45% used a down payment of 10% or less, and more than two-thirds used 20% or less.

With all that said, the ability to use a higher down payment is viewed as more favorably by a seller, and I’ll explain that separately.

Buyers are often perplexed when they hear that a seller chose a buyer who’s using a higher down payment. “Doesn’t the seller get the same amount of money either way?” Actually, sellers could care less about how much down payment a buyer uses. What sellers DO care about is what the buyer’s mortgage contingency clause looks like in an offer.

I like to think of contingency clauses as “But-Not-If” clauses, because that’s effectively what they are. In other words, a common offer with inspection and mortgage contingencies basically reads like this: I will buy your house for $XX, But-Not-If I don’t like the inspection results, And-Not-If I can’t get a mortgage for XX% of the home’s value. Hopefully, you can see where I’m going with this! There are different variations of But-Not-If clauses which vary in how much they protect the buyer’s ability to back out of the transaction. In the case of a mortgage But-Not-If, there’s a big difference between one that says a buyer needs to get approved for 97 percent of a home’s value and one that says only 70 percent of the home’s value is needed. Buyers using a 97 percent mortgage are assumed to be doing so because they don’t have the extra cash handy to use as a down payment. If a buyer is using every last penny to just barely put three percent down payment and pay for closing costs, almost any unexpected financial hiccup could make them become unqualified for their mortgage (or any mortgage). The But-Not-If clause in their offer would allow them to back out of the home purchase without penalty if that happened, which is why sellers are wary of their offer in the first place. If a buyer writes a But-Not-If clause that only requires a 30 percent down payment on the other hand, that buyer is also demonstrating that they have a more substantial pile of cash at their disposal to deal with any unexpected financial hiccups. That buyer is more likely to be able to weather a perfect storm of unexpected hospital bills and a dip in their income due to time out of work, interest rates rising sharply, etc. and still be able to purchase the home. The second buyer’s But-Not-If clause still says that the buyer can back out if they can’t get approved for a 70 percent loan, but the seller knows that the buyer is probably also able to use a loan with a lower down payment as a backup plan if need be. Your “But-Not-If” clause can mean a great deal if one of the conditions relies on you getting a loan for little down. Again, the buyer advertising that they need a 97 percent loan is making it seem like they don’t have a backup plan. Many buyers don’t realize that they’re not required to use the down payment they specified in their But-Not-If clause. If a buyer who is expecting competition on a home wants to put five percent down but is willing to put 10 percent down if they have to, I often suggest they consider writing their But-Not-If clause to reflect the 10 percent down payment rather than five percent. They can still apply for a 95 percent loan that way, but won’t be able to back out of the purchase if they can’t get it in the end. Their But-Not-If clause won’t kick in unless they can’t get the 90 percent loan, but they just might have beat out another buyer whose But-Not-If clause listed a 95 percent loan!

Multiple buyers submitting offers on the same property has been very common in Greater Boston for a while, and that has continued straight through during Covid-19. I have at least 14 different ways to help you tweak an offer to make the difference in being sidelined and getting it accepted. Although many buyers in the market feel the need to waive their home inspection, I have helped every first-time homebuyer I’ve worked with to craft an offer in such a way that they get an offer accepted with an inspection.

Before even discussing available options with my buyer, I call the list agent to ask what types of things would be advantageous to the seller. I’ve often discovered things like a specific week that the seller would like to close during, or some background about the seller’s move that can help my buyers craft a unique proposal for timeline flexibility, etc. After gaining that info and before filling out the actual offer form, I meet (or zoom) with my buyer clients to fill out my offer worksheet. I developed the worksheet to visually show buyers the 14+ areas where they can customize their offer, along with many of the options within those areas so they can see all the possibilities before deciding which combination they’re comfortable with. By breaking the offer down into its components and adjusting each individually, I help my buyers write the strongest offer they possibly can.

An escalation clause is basically a way to write an offer for a specific amount, while also telling the seller that you’re willing to go higher if needed to beat a competing offer. There are many ways to write one, each with its own pros and cons, and it’s important to keep in mind that many sellers and list agents aren’t even open to dealing with them. Assuming that the list agent / seller are amenable to one, it’s just one of the things I’ll discuss with you when customizing your offer to be stronger than others.

Closing costs typically cover things like homeowner’s insurance, legal fees, the mortgage application, plot plan, prepaid interest, recording fees, taxes, title insurance, and title research. They’re typically 1.5% to 2% of the purchase price, but can be even higher for certain loan programs. Make sure to ask lenders what their estimates are for closing costs so you can budget and not get caught off guard.

Yes. Yes. Yes. I can’t stress this enough! If the property receives multiple offers, a good list agent will not only compare the terms of each offer, but the type of pre-approval each buyer has and which lenders they’re from. Part of the question is whether your lender actually verified the income and debt income you provided them, or simply wrote a pre-qualification letter based on what you *told* them. Speaking of which, the term “pre-approval” is typically used to describe a letter written based on *verified* income and debt, while the term “pre-qualification” usually just means that a lender based their numbers on what a buyer *told* them. Despite that, I’ve seen some banks swap the terms inadvertently, which can lead to a weaker-looking letter. Despite the fact that I LOVE the bank I use for checking, savings, and insurance, I would never suggest using them (or another bank like them) for a mortgage or even a preapproval letter in the competitive real estate market we’re in. Instead, I have a short list of specific mortgage officers who work for lending companies that only do residential mortgages which I have either used personally or been very impressed with when my buyers used them. Of course, I don’t get any kickbacks from them for my lender recommendations, and I only refer buyers because I know the lenders will provide top-notch service and be ready to help out with any surprises that sometimes arise. I’ll be happy to share them with you when you’re ready.