Buying Real Estate in DC - Frequently Asked Questions
Washington D.C. offers home buyers some of the most interesting, and diverse, options available because of its blend of historic charm and big city hustle and bustle. If you are planning to purchase real estate in Washington D.C., you likely have some questions about the process. While it is always best for Washington D.C. home buyers to consult with an experienced real estate agent with specific questions, there are some general questions and answers that may help get you started.
- How much do I need to have upfront to purchase real estate in Washington D.C.? The amount of money you will need to have upfront will depend on a number of factors. The two most important of those factors are the price of the home and the type of financing you use to finance the purchase. Initially, you will need an earnest money deposit when you make an offer. This is essentially a “good faith” deposit to show the seller you are serious about the offer. You will also need anywhere from about 3.5 percent to 20 percent of the sale price as a down payment. In addition, you may be responsible for some, or all, of the closing costs which can vary greatly.
- What type of financing is available to purchase my home? Mortgage loans come in two basic forms – conventional financing and government backed financing. Government backed financing includes FHA loans and VA loans, for example. The down payment required for a government backed loan is typically much less than conventional financing – often as low as 3.5 percent. In addition, Washington D.C. home buyers can choose a fixed rate or adjustable rate mortgage. The monthly payment amount on a fixed rate mortgage will stay the same throughout the life of the loan whereas the monthly payment in an ARM is subject to change over the life of the loan.
- What is a buyer’s agent? A real estate agent can specialize is representing only buyers or sellers. A buyer's agent makes a contractual agreement to uphold the buyer's best interest throughout the entire home buying process, including confidentiality.
- What are some common closing costs? Closing costs are negotiable, meaning that the buyer and seller can negotiate who will pay most closing costs as part of the sale. Some common closing costs include mortgage application and processing fees, appraisal and title work fees, inspection fees, document preparation fees, survey fees, and attorney fees.
- What does my credit score need to be to qualify for a mortgage? Many factors go into whether or not a lender approves a prospective buyer for a mortgage loan to purchase real estate in Washington D.C. Your credit score is definitely an important factor. As a general rule, in order to get the best interest rate on an FHA loan, your credit score needs to be at least 640. For the best rate on a conventional loan, you should have a credit score over 700.
- Is a fixed rate of adjustable rate mortgage better? They both have advantages. With a fixed rate, you know what your payments will be for the entire life of the loan; however, your interest rate will probably be higher during the first few years of the loan. With an ARM, you will probably start off with a lower interest rate, and therefore lower payments, but they could increase significantly after the first few years. Be sure to talk to your real estate agent about which type of financing is best for you.
Knowing the answers to these basic questions should make your search for real estate in Washington D.C. go much smoother, meaning you will be in your dream home in no time!