How to Buy A House: Part 5 – Sign the papers, pay the lady!

This is part 5 in my mini-series on home buying. If you’d like to start from the beginning, click here

I’m excited to be moving into a new home if for no other reason than that I will never have to move ever again. Before we can get to the fun part of nesting, though, we have to finish a slog through paperwork and setting fire to piles of money. That’s what it feels like, at least.

As I’ve learned, once you find a house you like, a few things happen:

  1. You make an offer. Your realtor should work up a comparative analysis of other properties in the neighborhood to guide your offer. Now is a good time to question your decision and maybe even look at some of the competing properties!
  2. Your offer is accepted! 🙂 The first 10 days after mutual acceptance is the option period during which you’re allowed to back out. Get out your checkbook, because it’s time to pay people a bunch of money.
    • Earnest money – This is good faith money and is normally 1-3% of the home’s value. You won’t get this back if you renege on the contract.
    • Inspections – This includes a general inspection, drainage inspection, plumbing inspection, pest inspections, and any number of other things you that are oddly expensive. Kiss about a thousand dollars goodbye.
  3. Once you get the results of those inspections, it’s time to negotiate more.
    • Our house flat-out failed the plumbing inspection, but our realtor negotiated new plumbing into the contract. We didn’t get everything, though; our place still needs drainage work and insulation in the attic (where there is literally none).
  4. As negotiations wrap up, you’ll need to get your mortgage lender and title company involved.
    • You’ll go through another credit check and provide information for another analysis of assets and debts.
    • The lender will require the house be appraised, and your financing could be pulled if the appraisal value is noticeably different from what you’re offering.
    • A title company will check to ensure the property’s current title is legitimate, that the house doesn’t have any outstanding liens or taxes, and isn’t caught up in any legal disputes.
  5. Write some more checks.
    • Proof of home insurance is required by your lender. If you live in hurricane states, you’ll pay some of the highest rates in the country at an average of $1,600 per year.
    • Also a home buyer warranty, which covers repairs in your first year of ownership. That’s another few hundred bucks. 
    • You’ll receive what’s called a title commitment that lays out buyer notifications, which detail any easements and requirements that must be taken care of prior to closing. Corresponding title insurance typically costs 0.5-1% of the loan value.
  6. Finally, close on the house!
    • Give the house one final walk-through to make sure negotiated repairs are repaired.
    • Sign the agreement in between you and your lender, and the agreement between you and the seller.
    • Pay the big bucks, including the down payment (hopefully 20%+ of purchase price) and closing costs (about 2-5% of purchase price).
    • Get your keys and go run around your new house!

I’ve heard it said that a house isn’t a home until you’ve peed in it, and I fully plan to test this hypothesis.

But until then,
I’ll be right here.

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