Let’s face it, buying a home can be daunting. From negotiations to budgeting to logistics, the last thing you want is the burden of trying to understand the terminology of it all. So, if you’re a little confused about how you get pre-approved, what earnest money really is, or how to navigate due diligence, we’re breaking it down into the simplest of terms.
Pre-Approval
This term applies to the lending process and means that you have become eligible for a loan to finance your home through a financial institution. In order to qualify for this, you have to submit your financial information to the lender of your choice before the home buying process begins. The lender can be a bank, a credit union or a private lender.
They then have to calculate and determine what you can afford based on the information you provided. This is oftentimes the last step before the actual approval process, and makes it much easier for the buyer to negotiate with the seller.
Earnest Money
In the spirit of good faith, earnest money is a deposit made by the seller to the buyer to show that they are going to purchase the home. This money gives the buyer extra time to get financing, have necessary inspections made, conduct a title search, have the property appraised and prepare for closing. Once the documents are signed and the house is officially sold, the earnest money is then applied to the buyer’s down payment and closing costs.
Due Diligence
We’re sure you’ve heard this term used in everyday life, but in the real estate market it’s more a stage in the home buying process. This is the time after you’ve put your earnest money down, that you need to do your research and ensure the home you’re about to purchase meets legal standards. This is when you get inspections for termites, radon, the sewer line, plumbing and the foundation. This is also the time to make sure the area you’re living in doesn’t have any major issues or downfalls that you’re not comfortable with.
Buying a home can be a lot of work, but if you’re unsure about your options or how the process works, we’re happy to help. Give us a call today at (919) 205-3402, and let us answer any of your questions!
