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Exploring Your Mortgage Options
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1.THE THREE STAGES OF GETTING READY TO CLOSE
Ok, you’re close to buying a house, and after your offer has been accepted there are going to be three stages for closing the loan. These will be the home inspection, the appraisal, and the underwriting. Understanding how all these pieces work together will help you get ready to close your loan.
THE HOME INSPECTION:
After your offer has been accepted, your home inspection is going to be scheduled. This step isn’t required to get a mortgage, but it will help you protect yourself from purchasing a house that is going to cost you more than its actual worth. You’ll need to find an inspector and pay for the inspection, and your real estate agent may help you with this by recommending an inspector or even setting up an inspection for you. Remember, buying a house is nice, but this is important, so you don’t have problems in the future.
The standard home inspection will involve looking at surface-level elements of the house, like heating and cooling systems, structural components, appliances, outlets, and more. However, the inspector won’t inspect areas that aren’t visible or accessible. So, for identifying pest, radon, asbestos, mold, and lead problems you’ll need to get in touch with a specialized inspector.
You should attend the inspection and ask questions that come to you, as this is a good chance to walk with an expert through your new home. They’ll point out red flags and will recommend what needs to be fixed first and the best way to go about it.
HOW MUCH DOES A HOME INSPECTION COST?
A home inspection should cost you anywhere between $200 to $500, but this can vary depending on numerous factors, such as the size of the home and the inspector you’ve chosen. You should know that you get what you pay for, and inspectors have different levels of experience and knowledge, and they don’t need to be licensed in every state. You’ll be paying for an additional expense, if you’ve chosen a test or inspection that’s not included in your standard home inspection, like a radon test. As we know, buying a house is not cheap, so you should get the necessary inspections for your peace of mind.
THE APPRAISAL
The process of buying a house requires appraisals, as it helps ensures that both you and the lender don’t end up paying more for the home than it’s worth. Your mortgage company is going to order the appraisal, but the appraiser is going to be an independent third party always. This is because the law states that the appraisers can’t be affiliated with your mortgage company or you. That ensures that the appraisal process is going to be unbiased and fair.
You’re in luck if the appraised value of the home is higher than the purchase price, as that means you’ve managed to get a great deal and have added additional equity in your home. Conversely, a lower-than-expected appraisal value will cause problems for the mortgage process, as your lender isn’t going to lend more money than the appraised value of the property. There are a few options for you if the appraisal comes back low:
- Walk away from the deal
- Contest the appraisal if you think that the report has errors
- Lower the house price by negotiating with the seller
- Make up the difference in price by increasing your budget
HOW MUCH DOES A HOME APPRAISAL COST?
The average cost of a home appraisal can be between $250 and $600, but this may vary depending on the location and type of property. For instance, you’ll be paying more if you’re purchasing a multi-unit property, or if the appraiser must travel to a remote area you’re living in.
UNDERWRITING
When all of this is happening, your loan will be underwritten by your mortgage company. This process involves verifying your debt, assets, property details and income before final approval for the loan is issued to you. Most of this takes place behind the scenes, but you may be asked for additional documents by your mortgage company during this time. For example, they may ask you to show some documentation that provides proof of additional assets or shows where the deposits in your bank account came from. You must be vigilant in dealing with the requests made by your lender to ensure that the loan process isn’t slowed down.
2.WHAT YOU CAN DO TO ENSURE THE LOAN CLOSES
It’s important that you avoid making any major financial investments and cut back on spending to ensure that you don’t experience any problems with your loan closing. Avoid any purchases that will decrease your assets and don’t apply for new loans or credit lines. Once your loan closes, you’ll be free to start spending again.
Your debt-to-income (DTI) will change when you take on new loans, and that plays a significant role in determining the loan amount you’re approved for. You may qualify for less if your DTI increases, and this can lead to problems with the home price. If you increase DTI by 45% there’s a good chance you won’t manage to qualify for a mortgage.
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Further Reading
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