Preparing to Close on Your House
After your offer has been accepted by the seller, there are three important milestones that will occur: home inspection, appraisal, and underwriting. Knowing how these pieces work together can assist you in preparing to close your loan.
After your offer is accepted, you can schedule any inspections on the home. You typically have ten days to perform any inspections if you intend on using the inspections as a negotiating instrument or to rescind your offer, according to your contract. Home inspections are typically not required for getting a mortgage loan, it is a way to protect yourself from unforeseen expenses or major repair after you buy your home. It is your job to find an inspector and pay for the inspection, but your real estate agent should be able to assist you in finding and scheduling the inspector.
The extent of your inspection will vary depending on what you want them to look at. Common things that are inspected are structural components, electrical outlets, heating and cooling systems, appliances, water damage, and Wood Destroying Organisms (WDO) such as fungus, termites, or other organisms that are known to cause damage to wood. Depending on the age of your home you may choose to have inspections that cover lead, asbestos, and radon.
While it is not required to attend the inspection, it is recommended that you do so that you can ask the inspectors any questions about things that concern you with the house. It is your chance to get advice on any red flags with the house and what will be required to correct the issue. Knowing what is involved in repairing issues can assist you in making a decision to modify or rescind your offer. Often times after an inspection, the buyer and seller will negotiate certain repairs before closing on the loan.
What is the cost of a home inspection?
The cost of the inspection can vary drastically depending on the types of inspections that you have performed, the size of the house, and other factors, but will generally cost between $200 and $500. If you opt to add an inspection or test that is not part of a standard home inspection, such as testing for lead, asbestos, or radon, you will generally be required to pay an additional charge.
The appraisal is required for your mortgage loan unless your lender offers an appraisal waiver. The appraisal protects both you and the lender from owing more than the house is worth. Typically on a home purchase loan, the lender will only be willing to lend no more than 95-97% of the home’s value. Your loan officer will order the appraisal which will be an independent third-party. Federal law requires that the appraiser not be affiliated with you or the lender to ensure that the appraisal is accurate and fair.
Once the appraisal is returned to the lender, it is important to examine it. The value can come back higher than you offered, in which case you are getting a good deal on the house. If the appraisal comes back lower than what was offered, it can cause a problem with your mortgage loan because the lender will not want to exceed the Loan to Value (LTV) thresholds for your mortgage loan product. Here are some options if the appraisal is returned lower than expected:
- You can add more money to your down payment to make up the difference in price.
- Negotiate with the seller to lower the purchase price of the home.
- You can contest the appraisal if you feel there is an error contained in the report.
- Walk away from the deal.
What is the cost of an appraisal?
The cost of the appraisal will vary depending on location, home size, availability of the appraisers, and other factors. Appraisals typically range from $500-$750. Some factors that may increase the cost of the appraisal are buying a multi-unit property or living in a remote area.
While the home inspection and the appraisal are being conducted, the underwriters are working on underwriting your mortgage loan. They will be verifying your income, assets, debt, and property details to issue a final approval for the home loan. Much of this is happening behind the scenes with little to no interaction with you. Your loan officer may ask you for additional documentation during this process such as documentation on a deposit to your account or an explanation of some factors of your mortgage loan file. Be diligent and return the documentation to your loan officer promptly to avoid delays in closing your mortgage loan.
What Can You Do to Make Sure that Your Loan Closes?
Here are some guidelines to follow while trying to buy a house:
- Do not make any major financial changes such as quitting your job.
- Do not apply for additional credit until after your loan closes.
- Do not make a large purchase that will deplete assets that were disclosed to cover the down payment.
- Pay your bills on time.
Why Choose Homewise Financial?
- Application process is completely online.
- Loan specialists available to answer your questions and help you understand the process.
- As a mortgage broker, we have exclusive access to a vast network of lenders to offer competitive rates and diverse loan programs to suit your goals.
- Personalized experience. We will “hold your hand” through the process to ensure your comfortability with the loan program and process.