Home Buyers Guide
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Step 8: Financing & Other Considerations
The Loan:
Now that the contract is signed, you are ready to pursue
financing. You may want to shop around to make sure that your financing rate
and conditions are competitive. You should already have met with a loan officer
of a bank or lending institution, as we discussed before in "pre
qualification." If you have been prequalified, you're ready to begin
working on your loan with the loan officer you spoke with. Otherwise, you
should speak with your Realtor, as well as friends or family members who have
recently bought a home for feedback about their experience. Was the process
smooth, or were there problems? Did the approval come when promised? Find out.
The lender you select can be critical to the purchase.
Quite a bit of information is gathered before title to a
property can be transferred from seller to buyer. You may find it of interest
to know what transpires, as well as what you are paying for at the closing:
The Appraisal
The bank will order an appraisal of the property to be done. The appraiser
visits the property, takes measurements, inspects the condition, and makes an
assessment of how much the house is worth, based on their inspection and closed
sales of comparable properties. Lenders will determine how much mortgage they
will allow on a given home based on the appraised value. How much mortgage you
will qualify for will depend on your personal finances. The proper combination
of appraised value, down payment, and necessary financial requirements is
critical for the purchase of a home. Your Realtor can explain how this process
works and help you balance all of these elements to find the home that suits
you.
Title Search, Report & Insurance
In order to ensure that the seller is not only the rightful owner, and that
there are not other claims or liens on the property, a title search is
conducted. Title searches reveal any encumbrances that could hold up the
closing. The Title Company also insures their findings, in the event that any
mistakes are made, so they do not become your problem.
Termite Inspection
A certified termite inspector will perform an inspection for the presence of
termites, and will treat if necessary if termites are found. The inspection
then calls for a certificate insuring the property against termites for one
year. If treated, a lengthier guarantee may be given.
Homeowners' Insurance
Having homeowners' insurance is not an option. Your mortgage company or bank
will require that you purchase an adequate policy - one that names them, and
sufficiently covers the bank's and your investment in the event of fire or
disaster. It is important to note that your homeowners' insurance policy must
be renewed annually, and you should carefully review it at least upon renewal.
Take care to make sure that you periodically increase your coverage as your
home's value appreciates. It will not automatically increase in accordance
without your attention. Be sure to discuss this matter with your insurance
agent.
All of these elements must be completed before your
financing can be approved. Once your loan approval is granted, closing can be
scheduled.
Mortgage Life Insurance
Mortgage Life Insurance is term life insurance for the balance due on the
mortgage. If you die, the insurer pays the balance of the mortgage due at the
date of your death. As the amount due on the mortgage decreases, with each
mortgage payment, the amount of life insurance decreases correspondingly.
Home Warranty
A home warranty is a contract with a private company in which they agree to
repair or replace major systems in the house and appliances for an annual
premium. The coverage is available for both buyers and sellers. Components of
the house usually covered are plumbing, heating, electrical, ceiling and
exhaust fans, garage door openers, central vacuums, kitchen appliances, a
washer and dryer. Some companies offer the following optional coverage: central
air conditioning, freezers, and sewer ejector pumps. Sometimes owners offer
Home Warranties as an incentive to purchase their home.
From The Homebuyers' Guide, by Laurie J. Bloom,
© 1999 The Multiple Listing Service of Long Island, Inc. All rights
reserved.
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