Going over the fine print of a mortgage offer is about as enjoyable as a poke in the eye – or maybe both eyes. Even so, it's important to ensure that any contractual offer that you make on a home has just the right terms you need before proceeding through the home-buying process. Consider these five purchase conditions that you must carefully outline in any offer to buy a home.
1. Financing Conditions – Be clear on the financing terms in your offer. If you can only afford financing at a particular interest rate, be sure that the sale is contingent on achieving that rate.
Do you require a VA or FHA loan to make a purchase feasible? Are there other special financing requirements that apply to your case? Make sure you have defined your financial deal-breakers and must-haves and include those as conditions to be met before the home purchase can proceed.
2. Closing Costs – Buyers typically cover most of the line items associated with closing, such as appraisal fees, title insurance, prepaid insurance, and origination fees. If you need assistance from the seller to be able to make the purchase, be upfront about your expectations. A motivated seller may be willing to negotiate.
Casey Fleming, Mortgage advisor at C2 Financial Corporation and Author of The Loan Guide, suggests another alternative – folding your closing costs into your loan. "You always have an option with any lender today to trade off your upfront costs against your interest rate," says Fleming. "The less you pay upfront, the higher your interest rate is going to be, and vice versa." You can calculate the financial tradeoff over time and see if this approach works for you, given the interest rates for which you qualify.
3. Sale of Your Current Home – If you must sell your existing home to be able to afford your new home, be sure to add a clause that makes your purchase contingent on that sale. Be reasonable with your terms. A seller is not going to wait six months for you to sell your home – but 30 to 60 days is not unreasonable. Keep in mind that this contingency may scare off some sellers, especially if other buyers are interested in the home.
4. Home Inspection Contingency – Nothing can sour a mortgage deal faster than an unpleasant finding in a home inspection – such as evidence of past leaks and potential mold, a roof that needs immediate repair, or cracks in the foundation. With a home inspection contingency, you can be forewarned and walk away from a deal, avoiding unpleasant repair costs.
5. What Stays with the Home – Do you expect to keep some or all of the current furnishings and appliances? If so, you must spell out those expectations in your contract. It's fine if you negotiate what stays and what goes verbally, but make sure that your agreed-upon terms are reflected in the written contract.
Most real estate agents would go over these purchase conditions with you, and help you determine what to ask for in your specific situation – but if you don't know what to expect from a real estate agent, how do you know that you are getting the proper advice?
Take the time to review the entire mortgage process using the many online resources available to you, including the MoneyTips Mortgage Planner. By doing so, you will reduce your chances of getting burned by a poor contract offer, and will also feel more confident that you have chosen both your home and your agent wisely.
MoneyTips is happy to help you get free mortgage quotes from top lenders.