Who’s Responsible for What in the Mortgage Process
Are you closing on your first home and wondering what you’re responsible for? The amount of items on the checklist to go through when buying a home can be pretty daunting. Who pays for what? What if I forget something and arrive to the closing unprepared? Where do my responsibilities lie as a future homeowner? Where does my lender come in to help? What’s my real estate agent responsible for? Take a deep breath. We’ve broken it down so you’ll be prepared and confident on closing day. Here’s a list of items you might be wondering about, including who’s responsible.
Home appraisals are an important part of any home buying adventure. They’re written estimates of your proposed property’s value, used to inform everyone involved (the buyer, seller, and lender). This helps you and your lender ensure you’re not overpaying for your home.
Your lender will only be able to approve a mortgage that is equal to or less than the appraised value of the home.
Almost always, when a property is appraised in connection with a loan, the appraiser is selected by the lender, but you’ll be responsible for paying the appraisal fee.
Title search and insurance
In real estate business and law, a title search, also know as a property title search, is the process of searching public records that affect the title to a property. Simply put, a title is just the legal way of saying you own the right to something. Once a sales contract is signed, your lender will order the title search for you. They will pick an unbiased, third party title company, who will perform the title search, usually through searching the county’s records in the county that the home is in, but a homebuyer can pick their own title company if they choose. The documents found are analyzed, and the legal homeowner is verified. They’ll also determine if there’s any issues or debts against the property, such as liens, wills, divorce settlements, etc. Additionally, your lender will work with you to order title insurance, which protects you and the lender if issues or debts do arise in the future; also known as title defects.
Scheduling closing (with a title company)
Closing is the final step before you’re officially a homeowner. Typically, the closing timeline is agreed upon during the negotiation phase of the home buying process, and is usually scheduled for several weeks after your the offer is formally accepted. How long it takes to close will also vary lender by lender. Delays can also be caused by things like home inspection, title, or appraisal issues. At the closing, the ownership of the property is transferred to the buyer from the seller. Closings are typically a collective effort scheduled by your your settlement attorney/agent and lender. They’ll schedule the closing for a time that is convenient for both you and your real estate agent, so that all may attend.
Choose your lender and agent
Who you choose as a real estate professional and your mortgage lender is completely your choice. While your agent may recommend a particular lender, or vice versa, you should be aware that you’re not obligated to work with their recommendation. You want to find an agent and lender who are knowledgeable, honest, reputable, and accessible. Feel free to ask friends or family for referrals, and check reviews online.
Tip: It’s best to start with a mortgage lender so you know exactly how much home you can afford before you even start house hunting.
You’ll be required to purchase homeowners insurance to protect your the property’s structure (and its contents) against loss from fire and other hazards. Additionally, lenders require homeowners insurance to protect their interest in the property. If, unfortunately, your home were ever destroyed, the mortgage would lose its value. Therefore, you lender requires the insurance as collateral against the home. You’ll need to secure your homeowner’s insurance prior to closing. Who you use and the extent of coverage are your decisions as well. The lender may require a minimum coverage to cover your mortgage.
Not surprisingly, flood insurance was created to cover losses to your property caused by flooding. Homeowners insurance policies typically don’t not cover flooding. Usually, flood insurance is optional, unless you’re in a flood zone area. If you’re in a high risk flood area, your mortgage lender will most likely require you to get flood insurance. Even if your property is in a moderate to low risk area, a lender may still require it. So be sure to check with your lender to see if your proposed home will require it. You’ll need to get this before your closing date, and send proof of the coverage to your lender.
It’s time to get lights on and water running at your new place. By the time of your closing date, you should transfer utilities from the seller’s name to your own. This is when it all really starts to feel real.
Utility providers can include your phone/internet/cable provider, electric company, natural gas company, water company, and any others that are relevant to you. To stay on top of expenses, you may be able to ask the sellers about their average costs for electricity, water, gas, etc. so you know what to expect as your bills start coming in.
Real estate agent
To save (or prepare) yourself from any potential, big ticket item issues, a home inspection is an examination of the condition of your proposed house, including its structure, electrical, venting, heating/air, appliances and roof. They’re conducted by a professional home inspector. Your real estate agent traditionally schedules the inspection on your behalf, after you sign the contract and put down your escrow deposit. These are done early so that there’s time allowed for repairs or contract negotiations (if needed).
Termite/moisture inspections are done by individuals licensed to perform inspections of homes to determine damage or possibility of damage from bugs, insects,termites, or dry rot conditions. They’re check for damages to the foundation, doors, roof, etc., which could make the wood unstable. Most lenders require a pest inspection, but your real estate agent will likely schedule this for you. Your sales contract will state who’s responsible for paying for the termite and moisture inspections. Keep in mind, an inspection can’t reveal things that can’t be seen.
Schedule final walk-through
Just before closing, you and your agent will be able to take a final walk-through of your future home. Some buyers even choose to bring their inspector along as well. This is your final opportunity to ensure all agreed upon repairs have been made. Once your agent knows the details of your closing, they’ll work with you to schedule the walk-through. Buying a home is likely one of the largest purchases you’ll ever make, but getting a mortgage doesn’t have to be overwhelming or complicated. During the process, it can be hard to distinguish who’s responsible for what in the mortgage process, but your agent and lender should help guide you through the process.