October 2, 2023
Some borrowers need help getting ready for the unexpected during the home-buying process.
The unexpected can come in the form of a seller deciding they no longer want to sell the property, the borrower losing a job while the loan is on the way to closing day, or other issues.
But more mundane, unexpected things crop up along the way, such as certain fees and expenses situationally related to buying a home.
Not all borrowers have to pay them, but when circumstances require it, paying for unexpected contingencies like compliance inspections or hazard insurance may require you to be more creative with your finances.
Do you have a contingency plan for those compliance inspections, pest control, hazard insurance, or initial property taxes that need to be settled before the home can change hands?
Save Early, But Know Your Costs
“Save early” is pretty basic home loan advice. What’s the more advanced concept here? Knowningh how much to save and which expenses to save for.
Some may require additional fees depending on the nature of the expense and whether it’s associated with an appraisal or not.
For example, the fee for the initial appraisal costs roughly $400 or more. Your actual costs may depend on the housing market and other variables.
Some do not know (at first) that the appraisal might require repairs AND a compliance inspection. You will have to pay for the inspection, too, and it is good to know that detail up front as you have a better picture of how much might actually be needed for the process and not just for that initial appraisal.
It is wise to assume a worst-case situation when financially planning for these aspects of the loan.
Get Comfortable Haggling With Your Seller
You will feel stronger and more confident about negotiating with the seller when you have an advantage.
Do you need a compliance inspection because the appraisal revealed some issues needing correction? Were those corrections listed as a condition of loan approval? Consider haggling with the seller to determine who pays for this and how.
You could be offered a price break on the home, or the seller may agree to pay “concessions” (up to six percent of the sale price of the house, no more) to offset your closing costs. The seller may consider offering some other form of compensation, but the caveat?
Seller negotiations aren’t as advisable when there is a lot of competition for the home. The seller may just decide to move on to a less demanding buyer.
But when a housing market does NOT have high competition for existing inventory, this is definitely an option to consider.
Some borrowers may qualify for a local down payment assistance option, and in such cases, it is smart to investigate this as an option since it frees up more of your liquid cash to use in other parts of the home loan transaction. Your down payment savings could be repurposed to offset closing costs you might otherwise finance if you get outside help with your initial minimum required investment or downpayment.