It’s easy to breathe a sigh of relief once your home loan is approved and you have a closing date set. However, just because your loan is in the works doesn’t mean that it’s a done deal. In fact, while you wait around for your loan to close, there are a few more things you need to make sure are done.
Even though the loan is approved, and all the terms are set, it doesn’t mean that the lender is going to be happy with the situation. Before the lender will actually allow the closing to go forward, an appraisal will need to be completed. Appraisals are ordered by lenders so you don’t have to worry about how to get one.
For an appraisal, a certified professional will visit the home and assess its value. Many lenders won’t provide money that is in excess of what the home’s value is. If you plan to buy a home for $160,000, but the appraisal is for $155,000, someone usually needs to make up the difference. The bank will probably only offer a loan for the appraisal amount, and either you or the seller needs to be willing to pay the additional $5,000 if you want the deal to go through.
2. Home Inspection
Before you move in, a home inspection should be performed. You want to make sure that the home is structurally sound, and that it doesn’t have any serious problems. The lender is likely to want to make sure that it is in good condition as well. Before the mortgage closes, the home needs to pass an inspection. If the home doesn’t pass, you might not be able to close after all, unless you are buying the home for the specific purpose of fixing it up. However, if that’s the case, your lender should already be aware of the situation, and made a decision about it.
3. Homeowners Insurance
The lender is making a big commitment by paying for your home, and hoping you will repay the amount borrowed. If your home is destroyed or damaged, though, the chances of you repaying the loan dwindle. Homeowners insurance provides a level of protection. Your insurance policy ensures that the home can be repaired or replaced without straining your finances, so you can keep up with your mortgage obligation. Before the home loan closes, you will need proof of homeowners insurance.
Shop around for the best deals on homeowners insurance. If you already have an auto policy, you can find out if your company offers a discount if you bundle different policies together, and perhaps save on both your policies.
4. Down Payment
Any money that you are expected to put toward the process needs to be gathered before you close. Generally, everything is put together a few days before the closing date. If you are making a down payment, the lender should have looked at your assets to see what you have available. However, now is the time to make sure that your down payment money is in-hand. You’ll have to transfer it to an escrow account just ahead of the closing.
5. Another Credit Check
There is a good chance that the lender will run another credit check before the loan closes, especially if your closing date is a bit far out. So, just because the loan is approved, and the paperwork is going through, don’t assume that everything is ready, and you can start spending on your credit cards to buy things to outfit your new house.
Instead, you need to make sure that you don’t make any sudden changes to your habits. You want your credit to be at least as good as it was when you were approved for the loan. If the lender runs another credit check, and it looks like you’ve ramped up your credit usage, the loan may not go through after all.
Understand what you need to do between approval and closing so that you aren’t unpleasantly surprised with the loan falling through.