Because a home is a significant expense and buyers may not be fully trained to research and identify a comprehensive list of potential problem areas, we may need the assistance of licensed specialists. A general home inspection is a legally defined service that most homebuyers employ regardless of the age, size, or cost of the property.
A licensed home inspector will evaluate your home with a trained eye from top to bottom. That means everything visible, from the roof to the foundation, including major systems and building components. A general home inspection is most common, but other inspections may be desired and/or required. Depending on the property, buyers sometimes have additional components inspected, including pools, irrigation systems, septic systems, and main sewer lines. If the property has specialty systems, such as security, lighting, or entertainment, the buyer may wish to have those inspected as well.
Each inspector will clearly define their areas of focus and should provide a written report. It’s important to get your home inspection because it will give you a good idea of the maintenance and future repairs you may face. The inspection report may also be a basis for asking the seller to have some defects repaired at the seller’s expense prior to closing. Knowing the details of a home inspection can help you negotiate better with a seller, or help you prepare for repair costs should you decide to take on any projects yourself down the road.
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Paying for a home inspection is generally the responsibility of the buyer because the inspection is being done for the buyer’s benefit. It costs around $300-$600 or more depending on the location and size of the house. An inspection will generally happen after the house is under contract, so the buyer and seller are both committed to working together. Additional inspections are also typically done at the expense of the buyer and each will have a specified cost.
Private mortgage insurance may be required if you have a conventional loan and have less than a 20% downpayment on your home. This insurance protects your lender if you stop making payments on your loan. PMI is typically arranged by your lender and is provided by a private insurance company. Your PMI is typically paid as a monthly premium.
Title insurance is a special type of policy protecting the buyer/owner from future claims against the property. When a property is purchased with a mortgage, the lender will require a title policy that covers the amount of the loan. Buyers have the option of having policy coverage for the additional amount of money they invest (the purchase price less the mortgage amount). There is a one-time fee for title insurance and it is typically paid at the closing. The title insurance policy remains in place as long as the buyer continues to own the property.
Homeowner’s Insurance protects the owner’s investment in the event of natural disasters such as fires, tornadoes, storms, or other destructive events. The mortgage lender will require the homeowner’s insurance to meet certain standards and to take effect when the closing occurs. The policy is generally a one-year policy, and is renewable each year. For various reasons, the insurance company may adjust the policy rates at the renewal date.
City and county governments need funding to operate and to provide the citizens in their jurisdiction with support services. One of the sources of operating funds for the local government is property taxes. The taxes are typically based on the valuation of the home as identified in public records and they are billed as a percentage of the valuation. The recorded valuation may be adjusted periodically by the government so the taxation on the property may change from time to time. Typically the taxes are billed on an annual basis, but the timing is not necessarily at the end of the year. When a property is sold from one party to a second party, the taxes are prorated between the former owner and the new owner. This means both parties pay a share of the taxes for the calendar period during which they have the beneficial use of the property. Additional questions about taxes may be answered by your lender, REALTOR®, or your closing attorney.
The lender wants to be assured the property for which they have loaned money will remain intact without risk or loss. Therefore, they want to make sure the funds will be available each year to pay for the homeowner’s insurance and property taxes. Since the mortgage company knows the approximate cost of both, they often require the borrower to pay, each month, a portion of the annual cost of insurance and taxes into a special account. The account is controlled by the mortgage lender, and the lender in turn pays the insurance and taxes each time they come due. In this way, the cost to the buyer is equally spread throughout the year, rather than being a major expenditure at the due dates. Also, the buyer does not have to be concerned about the timing and delivery of the payment.
Are you a first-time homebuyer looking for a professional and trusted REALTOR®? Our agents are ready to help you find your ideal first home and can be a point of contact for any questions you may have throughout the process and beyond.