Sell My House House Buying 3

Question 1

What is the debt-to-income (DTI) ratio, and why do lenders care about it?

Accepted Answer

Monthly debt payments divided by gross income, used to assess repayment ability

Answer

DTI compares monthly debt obligations to gross monthly income; most conventional lenders prefer a DTI below 43%.

Question 2

In a bidding war, what does an 'escalation clause' allow a buyer to do?

Accepted Answer

Automatically raise their offer up to a set maximum if competing offers come in

Answer

An escalation clause automatically increases a buyer's offer by a set increment above competing offers, up to a maximum cap.

Question 3

What is the role of escrow in a home purchase?

Accepted Answer

A neutral third party that holds funds and documents until closing conditions are met

Answer

Escrow is managed by a neutral third party (often a title or escrow company) that holds earnest money and documents until all conditions are fulfilled.

Question 4

What typically happens to the earnest money if the seller backs out of an accepted deal?

Accepted Answer

The buyer gets it back and may sue for damages

Answer

If the seller wrongfully backs out, the buyer is entitled to a refund of earnest money and may have grounds to sue for specific performance or damages.

Question 5

What is 'points' in the context of a mortgage?

Accepted Answer

Fees paid upfront to the lender to lower the interest rate

Answer

Mortgage points (also called discount points) are prepaid interest — each point equals 1% of the loan amount and typically lowers the rate by 0.25%.

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Sell My House House Buying 3