Real Estate FAQs: Your Questions Answered
Your go-to resource for all things real estate. Whether you’re buying your first home or selling to upgrade, find the answers you need right here.
FAQ Categories
Buying Your First Home
Explore essential tips and advice for first-time homebuyers, ensuring a smooth and informed purchasing process. For a deep dive into the process, check out my series Home Buying 101
What’s the first step in the home buying process?
The very first step is getting clear on your goals and financial readiness. I always recommend starting with a conversation, not a search. We’ll talk through your Dream Mome vision, where you’re at financially, and what timeline makes sense for you. From there, connecting with a trusted lender to get pre-approved will give you a real understanding of your buying power.
➡️ Want a deeper dive into the early steps? Check out my post: Your Home Buying Journey: A Step-by-Step Guide
➡️ Reach out to me and let’s make a game plan tailored to your situation
How much down payment do I need?
The answer depends on the type of loan you qualify for and your financial goals. Some buyers put down as little as 3–5%, while others choose to put down 10%, 20%, or more to avoid mortgage insurance or keep monthly payments lower.
💡 You’ll want to speak with a licensed lender to explore your options and understand how different down payment levels affect your monthly cost and approval chances.
➡️ I can connect you with trusted lenders and help you make sense of the numbers based on your goals. Reach out!
What credit score do I need to buy a home?
Every loan type has different credit score requirements, but many lenders can work with scores starting around 620 or sometimes even lower. That said, a higher score may unlock better interest rates and terms.
📌 Your credit score is just one piece of the puzzle. A good lender will look at the full picture: income, debt, savings, and more.
➡️ Let’s talk through where you stand now, and I’ll help you take the next right step. Let’s chat
What is a contingency and why does it matter?
A contingency is a condition that must be met for the sale to go through. Common ones include:
- Loan contingency (you need final approval)
- Appraisal contingency (the home must appraise at or near the purchase price)
- Inspection contingency (you want the home inspected before committing)
Contingencies protect your deposit and give you time to back out if needed.
➡️ Here is a more thorough list of the contingencies and what they mean for you.
Can I buy a home with student loan debt?
Yes, you absolutely can! Student loans don’t automatically disqualify you from getting a mortgage. What matters most is your debt-to-income ratio (how much of your monthly income goes toward debt payments). I bought my first home while having over $60,000 of debt!
📣 Speak with a mortgage professional to understand how your student loans factor into your eligibility.
What’s the difference between pre-qualified and pre-approved?
Pre-qualified means you’ve had an initial conversation with a lender and they’ve given you a general estimate of how much you might be able to borrow based on self-reported info.
Pre-approved means your credit, income, and finances have been reviewed and verified by the lender. It’s stronger and usually required before submitting an offer.
➡️ Check out my post on The Importance of Pre-Approval
What is earnest money and how much do I need?
Earnest money is a deposit you make when your offer is accepted and Escrow is opened; think of it as a “good faith” commitment to the seller. It’s usually 1–3% of the purchase price, and it gets applied to your closing costs or down payment later on.
⚠️ If you back out of the deal without a valid reason (based on contingencies), you could lose that money.
➡️ I break down all you need to know about your EMD in this post
Should I wait for interest rates to drop?
Here’s the thing: trying to “time the market” is like trying to predict the weather months in advance. Rates might drop, but prices could go up. Or both could go up. The better question is: Are you financially ready to buy now?
If the answer is yes, buying now and refinancing later could be a smart move.
💬 Speak with a lender to understand how today’s rates affect your monthly payment and reach out to me to talk through your long-term goals.
What happens during a home inspection?
After your home goes under contract, the buyer typically schedules a professional home inspection. The inspector will check the home’s systems, structure, roof, plumbing, electrical, HVAC, and more.
📌 The buyer may request repairs, a credit, or price adjustment depending on what’s found, but that’s all negotiable.
Mortgages & Financing
Keep in mind this is just general information. You should reach out to your lender for specific answers and advice.
What’s the difference between an FHA loan and a conventional loan?
An FHA loan is backed by the Federal Housing Administration and is designed to help first-time buyers or those with lower credit scores or smaller down payments (as low as 3.5%). A conventional loan is not government-backed and typically requires stronger credit and a larger down payment, but often has fewer long-term costs.
💡 FHA loans may come with mortgage insurance premiums that stay for the life of the loan, while conventional loans can drop PMI once you build enough equity.
➡️ Need an introduction to some lenders? Message me
How do interest-only loans work?
With an interest-only loan, you pay just the interest on the loan for a set period (usually 5–10 years). After that, your payments jump to cover both interest and principal, often increasing significantly.
⚠️ Because these loans can carry higher long-term risks, it’s important to speak with a trusted lender or financial advisor before choosing this option.
What is a DSCR loan and who is it for?
A DSCR loan (Debt Service Coverage Ratio loan) is typically used by real estate investors. Instead of qualifying based on personal income, the lender evaluates whether the property’s projected rental income can cover the mortgage payment.
It’s a great option if you’re building a rental portfolio or want to invest without traditional income documentation.
📣 DSCR loans aren’t for everyone and terms vary by lender—so it’s important to speak with a loan professional who understands investment financing.
➡️ If you’re considering turning your current home into a rental or investing in your next move, let’s explore if this is a fit.
What are closing costs and how much should I budget?
Closing costs are the fees and expenses you pay to finalize the purchase of a home. They usually include lender fees, title insurance, escrow fees, appraisal, and more.
In Southern California, buyers typically pay 2–3% of the purchase price in closing costs.
📌 Your lender will provide a Loan Estimate early in the process to outline these costs.
➡️ I can help you understand which costs are negotiable and how to plan ahead so there are no surprises.
Can I use gift money for my down payment?
Yes, many loan programs allow you to use gifted funds from family members (or in some cases, close friends) for your down payment and even closing costs.
💬 Lenders have specific rules about who can gift funds and how it must be documented, so it’s important to work with someone who understands those guidelines.
How long does it take to get a mortgage approved?
Once you’re under contract, most home loans take 21–30 days to fully approve and close. Some lenders can work through the process faster, some loans have requirements that make them take longer. But the process starts before you’re under contract:
- Pre-approval can usually be done in 1–2 days. Usually depends on how long it takes you to get your documents to your lender.
- Full approval depends on how quickly you provide documents and how busy your lender is.
⚠️ Every situation is different, so working with a resposive lender makes a big difference.
➡️ Check out my Home Buying 101 series post on Full Loan Approval
From Where You're At to Dream Home
David can teach you how to get from where you’re at to that Dream Home you’ve been dreaming about for years.
Is it a good idea to buy a smaller home first and move up later?
Yes!!! For many people, this is the smartest path to long-term homeownership. Buying a smaller or more affordable home now allows you to start building equity, benefit from appreciation, and get familiar with the process, all while living in a space you own.
It’s not about settling. It’s about strategically stepping toward your dream home.
➡️ This is one of my specialties! Let’s talk about what you can afford now and how we can use that to get you where you really want to be. Message Me
Is it better to wait until I have a 20% down payment saved up before buying my Dream Home?
Not necessarily. While 20% down helps avoid private mortgage insurance (PMI), it’s not a requirement. Many buyers start with as little as 3–5% down, depending on the loan program.
The bigger question is: Will waiting cost you more in rising prices, rent, or missed equity?
📌 Everyone’s situation is different, and I recommend talking to a lender to run the numbers.
➡️ I can help you look at both short- and long-term options, so you don’t delay a smart move waiting for a “perfect” one.
Can I keep my current home as a rental when I buy a new one?
Absolutely. This is a popular way to start building wealth through real estate. Many of my clients buy their first home, live in it for a few years, then convert it to a rental and use the equity or income to move up.
Keep in mind: lenders will look at rental income, your debt-to-income ratio, and your reserves.
💡 Talk to a lender and tax advisor to understand your specific situation and what’s possible.
➡️ If you’re interested in this path, I’d love to help you map it out step by step.
How do I use equity in my home to buy my next house?
You can tap into your equity in a few ways:
- Sell your current home and use the profits as your down payment.
- Take out a HELOC or home equity loan (if you’re staying in your home or buying a new one before selling).
- Do a cash-out refinance if it makes sense with your goals.
📌 These strategies have pros and cons depending on your finances, rate environment, and timeline. Talk to a lender for the full picture.
➡️ I can help you figure out how much equity you have and what options make the most sense for your move-up plan.
What is a bridge loan and how does it work?
A bridge loan is short-term financing that helps you buy a new home before selling your current one. It “bridges” the gap between two transactions, usually by using the equity in your current home to fund the purchase of the next.
They can be helpful in a competitive market, but they’re not right for everyone due to higher rates and fees.
⚠️ Consult a lender who offers bridge loans to understand the costs and risks involved.
➡️ If timing is your biggest concern, let’s talk through creative strategies including how to make contingent offers competitive.
Can I buy a new home before selling my current one?
Yes, but you’ll need a plan. Options include:
- Getting a bridge loan or HELOC for the down payment.
- Qualifying for both mortgages if your income allows it.
- Making a contingent offer (less competitive, but sometimes viable).
📣 Each path has trade-offs, especially when it comes to financial risk.
➡️ Let’s build a move-up strategy that keeps your stress low and your goals front and center.
What are the tax implications of keeping vs. selling my first home?
Great question and one best answered by a qualified tax professional. That said, here are a few things to consider:
- If you sell, you may qualify for a capital gains exclusion (up to $250K for individuals or $500K for married couples) if you’ve lived in the home 2 of the last 5 years.
- If you keep it as a rental, you’ll have new tax considerations—like rental income, depreciation, and property deductions.
📌 This decision has long-term financial consequences, so speak to a CPA or tax advisor before you decide.
➡️ I’m happy to connect you with trusted pros and talk through your real estate options.
How do I know when I’m ready to buy my dream home?
This is part logic, part gut feeling and part strategy.
If you’ve built equity, your income has grown, or you’ve simply outgrown your current space, it might be time to start the next chapter. But readiness isn’t just about numbers. It’s about feeling confident in your plan.
➡️ That’s exactly what I help people with every day, building a path from where you are to where you want to be. Let’s talk through your goals and make a plan to get you home. Contact me today
Selling Your Home
Discover answers to the most common questions about selling your home with David Mercier Real Estate. Our goal is to make the selling process as smooth and profitable as possible for you.
When is the best time to sell my home?
Traditionally, spring and early summer are considered the best times to sell as more buyers are out, and homes often show better with natural light and curb appeal. But the best time? That depends on your goals, the current market, and what you’re moving into next.
➡️ Let’s talk through your timing, equity, and next steps to figure out when it makes the most sense for you to list.
Should I sell or rent my current home?
That depends on your long-term goals. Selling can free up equity and simplify your move. Renting may help you build wealth through cash flow and appreciation.
Here are a few things to consider:
- Do you want to be a landlord?
- Will the rent cover your mortgage and expenses?
- Do you need the equity for your next purchase?
📌 This is both a financial and lifestyle decision. I recommend talking to a lender and a tax advisor for a full picture.
➡️ I’d love to help you explore both options and see which aligns with your goals.
What do I need to do before listing my home?
Start with three key things:
- Declutter and deep clean – make the home feel spacious and welcoming.
- Tackle small repairs – buyers notice the details.
- Talk to a local agent (that’s me!) – so we can build a pricing and prep strategy tailored to your home.
Bonus tip: Don’t wait until the last minute to call me. Planning and preparation is key!
➡️ Let’s set up a walkthrough, and I’ll give you a custom prep checklist based on your home and goals.
How do I price my home correctly?
Pricing your home right from the start is critical. Overpricing can lead to sitting on the market and ultimately getting less. Underpricing can leave money on the table.
I look at recent sales, active listings, and market trends to analyze data and find your home’s true market value. If you want to price your home based on what you feel it’s worth without looking at data, we probably aren’t a good fit to work together.
➡️ Reach out and I’ll put together a pricing strategy that attracts buyers while maximizing your return.
What if my home doesn’t appraise for the asking price?
If the appraisal comes in lower than the purchase price, a few things can happen:
- The buyer may ask to lower the price.
- You can renegotiate or offer a credit.
- The buyer may pay the difference out of pocket (less common).
📌 Appraisal gaps are common in competitive markets. The key is having an experienced agent who knows how to navigate the conversation.
➡️ Let’s talk strategy before listing so we can price right and avoid surprises.
What are seller closing costs in California?
In California seller closing costs can be negotiated, but typically include:
- Escrow and title fees
- Transfer taxes if applicable
- Any agreed-upon credits to the buyer
📌 You’ll also want to account for any mortgage payoff and potential repairs.
➡️ I can walk you through a detailed net sheet so you know exactly what to expect and what you’ll walk away with.
Real Estate Terms Explained
Check out my blog series Home Buying 101 for tons of info!
What is escrow?
Escrow is a neutral third party that holds funds and documents on behalf of the buyer and seller until all parts of a real estate transaction are complete. It protects both sides by ensuring no money or property changes hands until everyone’s conditions are met.
Want to understand what happens step-by-step once you’re in escrow?
➡️ Check out my blog post: What is Escrow for a complete overview
What is title insurance?
Title insurance protects you against any future claims or legal issues related to ownership of your property, like undiscovered liens, recording errors, or ownership disputes. It’s a one-time cost paid during escrow and gives you peace of mind that you truly own the home free and clear.
📌 Your escrow officer and title company will guide you through the process.
➡️ Have questions about what title insurance covers? Check out my thorough blog post
What does “under contract” mean?
When a home is “under contract,” it means the seller has accepted an offer, but the sale isn’t final yet. The buyer and seller are working through contingencies like inspections, loan approval, and appraisal before officially closing.
💬 It’s a critical phase where I help guide you through negotiations and deadlines to protect your investment.
➡️ Let’s talk about what happens once your offer gets accepted and how to make sure it closes smoothly.
What’s a CMA and why does it matter? (Comparative Market Analysis)
A CMA, or Comparative Market Analysis, is a report I create to estimate your home’s market value based on recent sales of similar properties in your area. It’s how we determine the right price, whether you’re selling or deciding how much to offer on a home.
📌 Pricing too high or too low can both cost you; getting it right is key.
➡️ If you’re wondering what your home is worth, let’s chat. I’ll put together a free CMA tailored to your property.
What’s a 1031 exchange?
A 1031 exchange is a strategy that allows real estate investors to defer paying capital gains taxes by selling one investment property and buying another “like-kind” property within a specific time frame.
⚠️ Because 1031 exchanges involve strict rules and timelines, it’s essential to consult with a tax advisor or qualified intermediary.
➡️ If you’re thinking about selling a rental or buying an investment property, let’s talk strategy and I’ll connect you with trusted professionals to guide the process.
Still Have Questions?
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