When it comes to buying a home, there are more things to consider than you may realize. After all, it’s a lot more complicated than walking into the grocery store to buy a gallon of milk!
Buying a home is one of the biggest purchases the average person makes. As such, you can expect there to be a lot of preparation, negotiation, and paperwork involved. In addition to obtaining a mortgage and signing the paperwork, there are a number of other tasks that need to be completed before you can open the doors to your new home.
Here’s a quick crash course in Home Buying 101: what service providers you need to hire while purchasing your new home.
Ideally, you should start talking to lenders before you even begin looking for homes—and get pre-qualified for a mortgage as soon as possible.
Pre-qualification involves reviewing all of your finances, including income, expenses, and savings, with a lender.
Then, the lender will do some math and let you know exactly how much the bank is willing to loan you.
Before you purchase the home, you absolutely must schedule a home inspection! This usually happens after you negotiate a price and sign the initial Purchase and Sale Agreement with the seller.
The home inspector will carefully go through every room of your new home (including basement, attic, and roof) to ensure everything is in proper working order. If the inspector finds any major issues, you can negotiate with the seller to get them fixed.
The average home inspection costs around $315, but it may end up being higher depending on the size of your home as well as any other add ons. For a larger home greater than 2,000 square feet, it may cost upwards of $400 or $500.
After the home inspection comes the appraisal. Your lender requires an appraisal because they want to protect their investment by making sure the home is worth at least as much as they’re lending you.
The appraiser will take a close look at key features in the home and compare them to the features in other homes (and what those homes have sold for). If the appraiser values the home at less than the sales price, the bank will lower the amount of your mortgage to match it. If this happens, you have several options.
Depending on the contract you signed with the seller, you may be able to get your deposit back and walk away. You can also dispute the appraisal by talking with your Realtor about property values. Another option is to negotiate the price with the seller.
Title insurance promises peace of mind when buying a home. Basically, when you purchase title insurance, a title company will come in and ensure the seller actually owns the home and the title is valid. This protects you down the line, in case any issues come up regarding past taxes, contracts, or prior mortgages with the home’s title.
It’s also a good idea to purchase owner’s and lender’s title insurance to protect yourself and your lender from any issues with claims to the title of your property.
The cost of title insurance depends on the size of your mortgage and your location.