Appraisal & Property Insurance
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Assuming that problems found on the inspection weren't a show-stopper, here's what happens next:
The lender orders an appraisal
Once you're for-sure that you want the house, call
your lender and tell them, and ask them to order the appraisal.
Your lender wants to make sure the house is worth at least as much as
you're paying for it.
They don't want to loan
you $180,000 to buy a house that's worth only $135,000, because if you
don't make your payments and they have to foreclose on it, they'll want
to make sure they can sell it for enough to get their money back.
So the lender hires an appraiser to analyze the house's worth and give
a professional opinion about its value. Although the lender
orders the appraisal, you're the one who has to pay for it. (Did
you really think the bank was going to eat a cost they could pass along
to you?) It will run around $450. You can often have the
appraiser's fee added to the closing costs
that you'll pay at closing, but some
lenders might require that you pay it up front.
When you call to order the appraisal, ask when it should be completed
by. Then
call your lender the day the appraisal's supposed to be done to make
sure that it has been. Some lenders are lazy so you may have to
take the initiative if you want to move the process along. With an
inattentive lender, everything can come to a halt. (I've seen it
happen.) If the contract expires because your lender dropped the ball,
you might lose your ability to buy the house, and possibly even forfeit
your earnest money.
Let's say the appraisal has been completed.
If the appraisal says the house is worth less than the loan amount,
then your lender won't loan you the money for that house. You'll either
have to get the owner to lower the price, pay the difference in cash,
or start the whole process over again with a new house. It's rare that
you'd be in this position, because you should have had a good idea of
what the house was really worth as per the earlier steps, long before
you signed a contract.
More likely, the appraisal says the house is worth
enough, and so you're ready to buy!
Confirm the loan terms
One of the earlier steps was to evaluate
the bank's loan offer, so at this point you should already know
what kind of loan you want and can get. So call or visit your
lender and confirm the terms for your loan. You don't want any
surprises at closing. Get your lender
to give you a writeup of the basic loan terms. The main points
are:
- 15-year vs. 30-year (if you take 30-year, make sure
the lender allows you to pay it off in 15 without penalty)
- No prepayment penalty (or at least a prepayment penalty
that seems reasonable to you)
- FRM vs. ARM (take FRM if the interest rate is less
than 10%)
- Closing costs rolled into the mortgage, if possible,
and if that's what you want to do
Get property insurance
Select an
insurance agent to handle your homeowner's insurance, and give the
agent's contact information to the title company. Your lender will take
care of paying your annual insurance bill for you, by adding a small
amount to your monthly mortgage payment. You'll make an initial payment
for insurance at closing as part of your closing costs, not now. (If
you prefer, you can pay your insurance bill yourself, annually -- just
let your lender know that's what you prefer.)
Now there's only one more step left to buying your house,
the closing.
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Amount spent so far. Red
items apply towards the purchase. Amounts are typical, not exact.
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$40
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Credit Check
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To the Lender
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$150
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Option Fee
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Paid to the Seller. Might
apply towards purchase, depending on contract. Allows you to walk away
for any reason.
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$1000
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Earnest Money
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Held in Escrow, probably by the Title company
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$400
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Inspection
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To private inspection company to find physical
problems with house
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$100
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Termite inspection
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To private company; required by your lender
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($700)
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Termite treament
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(If necessary)
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$450
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Appraisal
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Ordered by the bank so the can make sure the
house is worth loaning money on
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$2140 - $2840
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Total
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If you liked this site then you might like some of my other sites:
How to Find Cheap Airfare How to Save Electricity How to get listed & ranked well in Google
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Michael Bluejay Inc. • All information is "use at your own risk" Contact
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