First Time Home Buyers Guide: Part 3
So you have selected your home and you have a mortgage company. The next steps are equally important!
1. The appraisal: Once you have the mortgage application has been accepted, the bank will send an appraiser to estimate the value of the home. The appraiser looks at competitive properties to assure the bank that your purchase is reasonable. If your appraisal comes back at or above your purchase price, you are in the clear. However, if the appraisal comes back for less than the purchase price, you will have a couple of options on how to proceed. 1)You can negotiate with the seller to get the price reduced. They may work with you or they may choose to find another buyer, especially if it is a competitive market. You can also split the difference. So, let’s say you are buying property for $500,000. The appraisal comes back at $490,000, you can say, let’s negotiate at $495,000. The seller takes $5000 off the price and you have to come up with $5000 to cover the difference. What I mean is that the mortgage company will only issue a mortgage for $490,000. If you cannot get the seller to accept a lower price, you will need to come up with the down payment. In this example the downpayment would be 20% and an additional $10,000. If this case that would be $98,000 and $10,000 for a total of $108,000. Some first-time home buyers can make a purchase with a lower down payment. You will need to discuss this with your banker.
2. Getting Title: Usually the attorney has a title company that they prefer to work with. The title company is very significant because they are securing that you will have ownership of the property and receive a clean title. Be on top of this process because if any issues arise during the title search, that could delay your closing or end your deal.
3. Closing: When the contract is signed, the buyer and seller agree to a closing date. It is usually 30 to 90 days depending on the situation. If it is a cash deal, it can close more quickly. Deals with financing usually takes 40 days, your mortgage banker will let you know. So the goal prior to mortgage is to get all the paperwork ready so the transaction can be completed. That means the title company needs to provide a clear title and also the closing documents usually 3 days before closing. This document shows the amounts that will be exchanged at the closing and should be reviewed with your attorney. You will need to have your portion of the funds wired or provide bank checks. Remote closings have occurred more frequently due to covid. However, I recommend that the buyer try to have the closing in person while taking the appropriate safety precautions. I believe when you are making a significant purchase, it is a good idea to be there in person.
4. The Walk Through: This occurs immediately before closing. During the walk through you and your real estate agent, need to examine the property to make sure it is in the same condition as when you made your home inspection. If there are any issues, then you need to immediately notify your attorney who will negotiate with the sellers attorney to rectify the situation. Here is an example of what can happen, when my husband and I purchased a home, we walked through the property and found a large hole in the bedroom ceiling. Apparently when the sellers moved out, one of them stepped into the attic and the ceiling was not meant to hold the weight of a person. We had to have money put into escrow so that we could hire a repair man to fix this. When we provided the receipt for the work, the money was paid from escrow. The remainder was paid to the seller. Walt throughs are very important!