Buying a Home: The Paperwork
Once you've got a contract on a home, then the fun starts-paperwork!
We submitted the signed contract to our mortgage lender and they sent us each (my husband and myself) a HUGE folder full of papers to sign, including the loan application. Most of them are just giving the lender permission to your information. You have to agree to get home owners insurance before closing, get title insurance, etc. Getting home owner's insurance is really easy. Just contact an agent (maybe the same person you use for auto!) and they will set you up. Because our insurance is paid through our escrow account, the insurance agent just sent the bill to our lender and we paid one year upfront at closing (about $600). Title insurance, on the other hand, is a 1-time fee that you pay, usually worked into your closing costs, that is just for peace of mind. Before closing, a title search is done to make sure there are no liens against the property or other legal issues. In case something is missed during the title search, that is why you get title insurance.
Your mortgage lender will also provide you with what's called a Good Faith Estimate. This is an estimate of what your closing costs will be! Your closing costs may include all of the following:
- Down payment (as low as 3.5% with FHA, but usually 10-20% of purchase price)
- Origination charge (What the bank charges to get you the loan)
- Appraisal Fee
- Flood certificate fee
- PMI/FHA MIP/ VA fee (loan ins. I talked about in an earlier post-for having an FHA loan)
- Title services and title insurance
- Government recording charges (state and local filing fees)
- Transfer taxes (local fee on home sales)
- Initial escrow deposit (includes all insurance and property taxes)
- Daily interest charges (interest gained from the time of closing to your first monthly payment)
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Wow! That's a lot! But it's definitely good to know ahead of time everything that you will be responsible for paying. After you sign all the documents and submit them to the underwriter, you just have to wait for approval. In the meantime, you will want to take care of having a home inspection and appraisal done.
Our mortgage lender arranged the appraisal. Basically, the appraisal is to ensure that the home you are buying is worth what you are taking a loan out for. The bank would be very uncomfortable lending someone $200,000 for a home worth only $150,000-for example. The appraisal cost about $500 (which we paid at closing).
While the lender takes care of arranging the appraisal, YOU are responsible for finding an inspector. Our wonderful real estate agent recommended one to us. If I remember correctly, it cost about $300 (which you pay directly to the inspector). You will want to be present during the inspection so you can see first hand any issues with the home. Our inspector was really helpful as he gave us a big binder full of details on everything he found, from major problems to safety recommendations. Thank goodness for the inspection though, because it came back that the furnace needed replacing! The heat exchange was broken.
When something major comes up in the inspection, you can then go back to the seller requesting action. They can either fix it, offer to pay something for it, or do nothing! Thankfully, our seller was nice enough to pay for half the cost of a new furnace. We ended up paying about $800 (our part) for a new, high efficiency furnace-not bad!
With all the paperwork taken care of (and the loan hopefully approved!), the only thing left is closing!..
One last thing, I'd like to give a big thanks to the people from WallaceLiving. They're a first-rate seniors appartment rental service in Nova Scotia. The concept for this post came about as a result of a discussion I had with someone over there. Anyway, I hope you enjoyed this content. Until next time.
Posted in Real Estate Post Date 10/26/2015