Stage 6 – Preparing to Close the Deal
Once a seller accepts your offer, you’ll need to close your loan, which occurs in three stages: home inspection, appraisal, and underwriting.
You should know every step of this process to help things go along smoothly.
Home Inspection
You are going to want to schedule your own home inspection once a seller accepts your offer. Granted, this isn’t a requirement to get a mortgage, but it’s an excellent way to protect yourself from getting into a home that will cost more money than its worth!
Finding and paying for an inspector is on you. However, your real estate agent will probably be able to toss good recommendations your way. Some can even set the whole thing in your stead.
Typical home inspections cover surface-level elements such as structural components, outlets, HVAC systems, appliances, etc.
An inspector can’t check those aspects of the home that aren’t easily reachable or visible.
If you want more in-depth inspections (such as asbestos, mold, lead, radon, or pests), you’ll need specialized inspectors.
Also, try and attend the inspection! It’s a perfect opportunity to ask questions and get to know your new home thoroughly. Inspections are also a good way to find about potential red flags and recommendation on how to address future issues when the time comes.
Pro Tip – Inspections & Pricing
A home inspection typically averages between $200 and $500. But that amount can vary widely depending on the inspector, the home, and other criteria. As with anything else,with inspections, you get what you pay for. A more knowledgeable or experienced inspector will charge higher rates.
Appraisal
As opposed to inspections, appraisals are required as part of the home buying process. They protect both you and your lender from overpaying on a property.
Your mortgage company will order the appraisal for you, but the appraiser is always an independent third party. Meaning they will not be affiliated with your lender by law, which ensures the process is fair.
If by any reason the appraisal value comes back higher than your purchase price, that’s great! You just get yourself some equity and an excellent deal.
By the same token, a value that comes under the purchase price can impact your mortgage process, since your lender will never lend more than the appraisal value!If you find yourself in that situation, you still have a few options:
- If you can afford it, you can compensate for the difference yourself.
- You can renegotiate with the seller for a lower price.
- Contest the appraisal if you think there has been a mistake.
- Walk away from the deal.
Pro tip – Appraisal & Pricing
The average cost for an appraisal sits around $250 and $600. Again, this cost can vary depending on the type of appraisal and location of the property. If, for example, you are buying a multi-unit property, or the appraiser has to travel to the house’s location, you’ll probably pay more.
Underwriting
While all these things are taking place, your mortgage company will work on underwriting your loan. Underwriting is the process of verifying your income, assets, debt, and property details to issue your final loan approval. Think of it as the lender dotting the i’s and crossing the t’s.
A lot of this happens behind the scenes, but don’t be surprised if your mortgage company asks for additional documentation during this period. It is completely normal. For example, they can ask for documentation showing where the deposits in your bank account came from, or for you to provide proof of additional assets.
Keep on top of your lender’s requests, as any delay will also slow down the loan process.
Additional Tips to Ensure the Loan Goes Through?
The biggest thing you can do to make sure you don’t run into unexpected issues at this stage is to avoid any significant financial changes or spending! Do not apply for new credits lines or other loans, and avoid big purchases that would diminish your assets.
Those things are best left for after the loan process closes.
Why? Because taking new debt changes your DTI (debt-to-income) ratio! Which is a crucial factor in determining the loan amount you can get approved for. DTI increases might have you qualify for a smaller loan, which can lead to further problems depending on your home’s price.
Pushing your DTI past the 45% mark runs the risk of rendering you unable to qualify for a mortgage at all! So it is best to be patient and tackle one thing at a time.
