After finally saving up enough money to use as a down payment, I decided that it was time to hit the market. I met with a lender, got pre-approved for a loan, and then started visiting different properties. However, I quickly realized that I didn't know as much about real estate as I would have hoped. I wanted to find a great neighborhood and know what to ask the professionals, but I could tell that I needed a little help. To point me in the right direction, I started working with a great real estate agent who was familiar with the area. This blog is all about educating the general public on real estate matters.
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Earnest Money
While earnest money is typically paid after an offer is accepted, this is not money that is gone forever. You still need to have the cash on hand to provide the earnest money, even if you are using home financing options that do not require a down payment. The earnest money is used to ensure that you follow through with the purchase of the home, and it prevents you from backing out of the sale for a variety of different reasons. While you still have a couple of points where you can back out of the sale, it must be for a specific reason that is allowed.
Home Inspection
You'll need to pay for your own home inspection. Some states require that you get a home inspection, while others make it an optional process. This is something that you must pay for out of your own pocket and is highly recommended when buying a home. It allows a professional to come into the house and look for potential problems that would prevent you from buying a home. Thankfully, you will be able to get your earnest money back if you end up walking away from the home because of hidden problems that were found.
Appraisal
Any home buyer who is using a mortgage to secure financing for their home will need an appraisal. This is something that you pay for and will tell your mortgage lender how much they feel that the home is worth. The goal is for your lender to know that they are not giving you money for a home that is worth far less than what you are paying for. If the home's appraised value comes in low, the mortgage lender will likely cap the amount they will loan you to the value of the appraisal. This means you'll need cash on hand for a bigger down payment or try to get another appraisal to challenge the initial findings.
Insurance Premiums
You'll need homeowners insurance if you will be getting a mortgage, and it is common for your first year of premiums to be paid in full before you can close on the home. Renewing that policy each year will also be a requirement of your mortgage from your lender since it is technically owned by the lender until your mortgage is paid off.
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