Steps Involved In Closing On A New Home
For the first time homebuyers, settlement or closing on the new home can be daunting. You are not only required to sign a lot of documents but also have to ensure that everything stated in those documents is correct and not ambiguous or misleading. A whole new vocabulary has to be mastered to understand the technical lingo of real estate. Before going to settlement, it is advisable to acquire as much knowledge as possible about the settlement costs so that you are well-prepared to cover those costs. Settlement costs can be up to 6% of the price of your new home. This can be very high so the first thing to so is to negotiate properly with your settlement agent and the seller.
Getting your credit report is an important step involved in going to settlement on your new home. Mortgage pre-approval is guaranteed if you have a high credit score. Furthermore, the interest rate will be low. Nowadays it is possible to obtain a free credit report and credit score online. In addition to this, financial assistance is also given in order to help you improve your credit score before you apply for a loan. Earnest payment or a good-faith deposit has to be paid when you make the offer to buy a home. This money has to be returned to you if you decide not to proceed with the transaction, so make sure your money goes to safe hands. After the seller accepts your offer, you can proceed with getting an appraisal.
The settlement costs are also dependent on your credit score. So, it will be better if you rely on the estimate provided by your lender instead of doing calculations on your own. The terms found in the contract include appraisal fee, credit report, earnest money, loan origination fee, and property survey fee among many other costs. A certified appraisal is required by your lender to get an estimate of the home you are about to buy. The appraisal fee is different in different circumstances but can be up to $300 or more. Location is the most important factor in determining the market value of a property. Familiarize yourself with different types of value, such as investment value, liquidation value and insurance value before proceeding with the settlement.
Origination fee is charged by the lender to handle your loan application. This fee is usually 1% of the total loan amount. However, it is also dependent on the loan points. Your aim is to locate a deal with the lowest interest rate and the least number of loan points, as each point increases your origination fee by 1%. In addition to these costs, you are also required to buy a Homebuyer’s Report and a Full Structural Survey before buying a home. Full Structural Survey is more expensive than the other report and covers many aspects of the overall condition of the home you are about to buy. Choose a reliable and reputable company to survey your home. The cost of a survey depends on many factors including shape and size of property, accessibility, time of year, and some others.
So, you see many documents have to be studied and signed, reports have to be ordered, and fees have to be paid before you can finally step into your new home. Follow the steps carefully in order to avoid paying more than you had to. You need to familiarize yourself with the terms and conditions and only proceed after thorough investigation. Make sure you are maintaining a file with all the documents including sales contract, tax payment receipts, booklets from the lender and the manufacturers of equipment in the house, and all other copies of signed forms.