Okay, so we briefly (not not so briefly depending on your definition) went over putting in an offer on a home and the basics of doing so.
So what happens after you go under contract? It happens quickly!
1) Earnest Money to Title Company, Option Fee to the Seller’s
Basically, that check you wrote for the earnest money is given to the chosen title company. If you decided to go with an option period, that check is given to the seller’s to deposit.
Unless the seller of the home DOESN’T have an existing survey that is acceptable for the title company or your chosen lender, either yourself OR the seller will be required to order a survey This would be stated in the original contract. Surveys can run $400-500. Not terrible, but let’s hope the seller held onto theirs–a good listing/seller’s agent would have this uploaded with this house listing when first putting the home up on the market.
3) Home inspection!
Your Realtor should recommend a home inspection and you’ll want to get this done in an option period if you’ve chosen to do the option–THAT WAY if something horrific comes up in the inspection (ex: foundation is shot, leaks will cause a second floor to cave in, etc.) You can back out for just your option fee–earnest money returned to you. My recommendation is to get it done early enough in your option period so you ample time to discuss the problems in the inspection report with your Realtor and see which repairs, if any, you want the seller to fix prior to closing.
I also recommend that you attend the inspection–not everyone does, but the inspector can give you a brief overview of what he finds that day so you know what to expect.
3B) Termite inspection
This will run you about $75-100, but again-CYA (cover your ass) here. AND your lender is going to require it, but better to know if there is any evidence of termites now then do have something terrible happen later–knowing that you could have avoided huge costs for $75-100…you might kick your own ass.
It is at this point you have more options as a buyer.
a)There are repairs you don’t want to deal with in any scenario-if you paid an option fee you can forfeit that option fee and walk away.
b)Still within an option period here you can get with your Realtor and decide what repairs you’d like to negotiate on. As long as you negotiate within the option period, you can still back out for just your option fee, if you need to.
c) You didn’t pay an option fee-or time ran out on the option? As long as you specified that you would want to the seller’s to pay a given amount towards repairs-they would need to do that said amount of repairs. You should receive receipts on such repairs, and if you want, get your original inspector out to the house to re-inspect. Usually, this cost is far lower then the original inspection.
d) For whatever your reason, you didn’t want to do an option fee and you didn’t ask for any seller repairs in the offer–No matter the inspection, no matter what repairs you may need, you will still be under contract to buy the home. You aren’t totally lost yet–check out this list of what you can do in this situation.
e) In Texas, a lender can require repairs on the home. If the repairs are in excess of 5% of the purchase price-you have the ability to back out of the contract without penalty–Option period or not.
Okay, done the repairs/negotiating repairs/ect–You still want your house! Excellent. Let get back on track with:
Your lender is going to order an appraisal on the home you’ve chosen to make sure that the house is worth what you’ve negotiated to pay for it. Thanks, lender! They are covering you, but just as well, themselves–they don’t want to lend you $200,000 on a home that’s only worth/appraised for $160,000. Makes rational sense, right? In most cases, the listing agent did the legwork to make sure the seller was listing the home at a price that it would likely appraise for. However, it DOES happen that the appraisal comes back lower then what the house is listed for. In this case, the seller can drop their price to meet the appraisal and have the sale of the home go through–OR you can walk away-another out here–which, honestly would really stink. But here’s the reality:
Listed Price: $200,000
Appraised value: $160,000–lender will only lend 90% of THIS value in a modern day 90:10 conventional mortgage ratio. Meaning you are bringing 10% down to the table–in this case $16k. Which, to come full circle, would mean your lender MAX would lend you $144k. Do you have that extra $40,000 stashed somewhere for a rainy day? Most folks don’t.
But, let’s say all in hunky dorey-we move to:
5) Confirm mortgage terms/rate
At this point, you should know what type of loan you’re getting (conventional/VA/FHA) and get a solid idea as to what your rate is. It’s at this point it’s just piece of mind to confirm all these details so you don’t crap your pants from a surprise at closing.
You should find and select an agent for your property insurance. I found, when I was buying our home that we already had used GEICO for our car insurance, and when renting used their affiliate for rental insurance. So, to me, it made sense to check with GEICO again for property insurance. They just happen to be affiliated with Liberty Mutual-and the agent I spoke to was excellent. I filled out an application online, she called me back to clarify a few home details, and that was about the long and short of it. Generally, your chosen property insurance company will get with the title company and lender to get the policy in place. Most folks opt to have the lender pay the property insurance bill-and what happens there is that the property insurance is tacked onto the mortgage. It adds a little to your monthly payments every month you don’t have to worry about a separate bill. Although, if you’re into paying it as a separate bill every month–you can let the property/home insurance and your lender know that’s what you prefer to do.
OKAY, NEXT–It’s the last part of the home buying experience and what we all look forward to–CLOSING!!
Til Part V-CLOSING CEREMONIES!