The first step in purchasing a home is to get pre-approved for a mortgage. A lender’s pre-approval letter sets the process in motion smoothly. Here’s why:

First, it helps you determine how much you can borrow, allowing you to focus your home search on properties within your budget. This saves time and helps avoid the disappointment of falling in love with a home that’s out of reach financially.

Second, the loan estimate from your lender will outline the amount needed for the down payment and closing costs. This gives you time to save, sell other assets, or arrange for gift funds from family. Being pre-approved also signals to your real estate agent and sellers that you are a serious buyer.

In the higher-end luxury market, most real estate agents require pre-approval before showing homes. Sellers often only allow pre-screened and verified buyers to view their properties. This not only protects the seller’s privacy but also adds an extra layer of security against potential criminals who might be scouting for valuables or assessing security systems.

It typically takes about 10 to 12 weeks to buy a house, from the initial online search to closing escrow. Under normal market conditions, the escrow process alone usually takes 30 to 45 days. However, cash buyers can often shorten this timeframe by several weeks.

The housing market is influenced by economic conditions. In a strong economy with high sales activity, the process may take longer, especially in hot markets. This is because the parties involved in the transaction, such as appraisers and inspectors, can become backlogged when business picks up.

When demand for homes is high, the need for property appraisals and inspections also increases. However, a surge in home sales can strain the availability of appraisers and inspectors, potentially causing delays as the demand for their services outpaces supply.

In a sellers’ market, increased demand for homes drives up property values. Several factors contribute to this demand:

Economic Factors – The real estate market is deeply influenced by external conditions, such as a booming local labor market or an influx of new residents, which can push home prices higher before additional inventory is available.

Falling Interest Rates – Lower interest rates make homes more affordable, attracting new buyers, especially first-time homebuyers, who can now afford larger properties due to reduced costs.

Short-Term Interest Rate Spikes – A sudden, sharp increase in interest rates can prompt “on the fence” buyers to act quickly, fearing that rates will continue to rise. As interest rates climb, affordability decreases, prompting some buyers to enter the market sooner.

Limited Inventory – A shortage of new construction leads to fewer homes for sale, which can drive up prices for existing homes as demand outpaces supply.

A buyer’s market is characterized by falling home values and decreased demand. Several factors can impact buyer demand, both in the short and long term, including economic disruptions, such as when a major corporation shuts down and lays off employees.

Rising Interest Rates – As interest rates increase, the pool of potential buyers shrinks because borrowing becomes more expensive. This reduction in purchasing power leads to fewer buyers in the market, causing home prices to drop to align with demand, allowing buyers to secure better deals.

Short-Term Interest Rate Drops – A temporary decrease in interest rates can give buyers an advantage, enhancing their purchasing power before home prices adjust to the latest rate changes.

High Inventory – A surge in new developments can exert downward pressure on the prices of existing homes nearby, particularly if those homes lack highly desirable features, such as modern appliances.

Natural Disasters – Events like earthquakes or flooding can lead to a decline in home values in the affected areas.

In a stratified market, supply and demand can vary significantly based on different price points within the same area, often within the same city. For instance, homes priced above $1.5 million might experience high demand (a seller’s market), while those priced under $750,000 may see slower sales (a buyer’s market). This situation, while uncommon, does happen.

Homebuyers are not charged any commissions or fees by their agents when purchasing a property. Here’s why:

In most real estate transactions, there are two agents involved: one representing the seller and another representing the buyer.

The seller pays the listing agent to market and sell the property. This includes costs for advertising, such as radio spots, magazine ads, television, and online promotions. The property is also listed on the local Multiple Listing Service (MLS), making it accessible to other agents in the area and across the country.

The buyer’s agent, or buyer’s representative, is compensated by the listing agent for bringing a buyer to the transaction. When the home is sold, the listing agent shares the commission with the buyer’s agent, meaning that buyers do not have to pay their agents.

Most loan programs require a FICO score of 620 or higher. Borrowers with higher credit scores are considered less risky by lenders, which often leads to lower down payment requirements and more favorable interest rates. On the other hand, homebuyers with lower credit scores may need to provide a larger down payment or accept a higher interest rate.

The average down payment in the United States is around 11%. However, this figure includes both first-time and repeat buyers. To break it down further, while the typical down payment is 11%, first-time homebuyers often put down only 3% to 5% of the purchase price. This is largely due to various first-time homebuyer programs that require minimal down payments. For example, FHA loans, which have been available for years, require just a 3.5% down payment. Additionally, some programs allow families to contribute.

There are also programs that require even less. VA and USDA loans, for instance, can be obtained with no down payment at all. However, these programs come with specific eligibility criteria. VA loans are available exclusively to current or former military personnel, and USDA loans are limited to low- to moderate-income buyers in designated rural areas.

Traditionally, a 20% down payment was the standard for conventional loans, typically used by repeat buyers who could leverage the equity in their existing home. However, some newer conventional loan programs now allow borrowers to be approved with as little as 3% down, provided they secure private mortgage insurance (PMI).

When you make an offer on a property, your real estate agent will typically ask for a banker’s check as part of the process (these checks are treated like cash, with the deposit usually ranging from 1% to 3% of the purchase price). This deposit demonstrates to the seller that the buyer’s offer is serious and made in good faith.

A mortgage broker acts as an intermediary, transferring the funds from the buyer to the seller. The check (or cash) is placed in a trust or escrow account for safekeeping. If the sale goes through, the earnest money is applied toward the down payment and closing costs. If the deal falls through, the money is usually returned to the buyer.

Important: If both parties agree to a contract and the buyer later decides to back out, the earnest money might not be refunded. Be sure to ask about protecting your earnest money deposit, such as through specific contingencies in your offer.

Sellers have the option to accept or reject an initial offer, but there’s a third, very common approach: making a counteroffer. Keep in mind that a deal isn’t over until it’s truly over. If the seller presents you with a counteroffer, you’re still in the running. Negotiations can often go back and forth before both parties reach an agreement—this is a normal part of the process and something Realtors handle regularly. Each round of revisions should bring both sides closer to finalizing the terms of the transaction. Now, let’s address a few more real estate questions.

Absolutely! If you’re using an FHA or VA loan to purchase a house, a home inspection is required. While inspections are not mandatory for other types of mortgages, they are highly recommended. A home inspection can uncover hidden issues in the property, giving you peace of mind and security in one of the most significant purchases you’ll make in your lifetime.