Under Contract: Locking in Your Mortgage and Getting a Home Appraisal

Under Contract: Locking in Your Mortgage and Getting a Home Appraisal

Buying a Home 101 series – Week 8

This step-by-step series will take you through the entire home-buying process — from finding a buyer’s agent to settlement day, and all the details in between. Every first-time buyer will find this information-packed series easy to follow and understand. Make sure to tune in for the next few weeks!

Once you’re under contract to buy a home, you want the final stages of the mortgage process to go smoothly – you don’t want anything to sidetrack the sale from here on out!

Nothing is a done deal yet even when you’re under contract. Both your future home’s appraisal and your ability to lock in a good mortgage rate can affect the outcome of your purchase.

So here’s what you need to keep in mind when you reach this stage:

Appraisal of Your New Home

Why do you need an appraisal now? Your appraisal is the bank or lender’s way to make sure the home you’re buying will sell for at least the amount of money they’re going to lend you. Your Loan Officer has already approved YOU and your finances but now it’s got to approve the home you’re about to buy.

A licensed appraiser’s report is much more detailed and the only valuation report a lender will consider when determining if it will lend money to a borrower. The report will include:

• details on the property/home:
• comparisons to several other similar properties;
•  an evaluation of the local real estate market at the time;
•  statements on any issues that may hurt the property’s value, such as structural damage or even if the property took too long to sell.

Don’t confuse an appraisal with a home inspection! Appraisers are not home inspectors so don’t rely on them to determine if your home is in good condition. They don’t look for leaky roofs, test appliances, or any other items found on an inspection check-list.

Appraisal Waivers. In some cases you may be able to get an appraisal waiver, meaning that the lender will not require a full appraisal report to be completed. This is dependent on a number of factors, which include the type of loan program you are in and how much you are putting down. Even if you are granted an appraisal waiver, you always have the option to get a full appraisal done of the property.

Locking In Your Mortgage Rate

What exactly is a lock-in?  A lock-in is a lender’s promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time (typically 30, 45, 60 days, or more), while your loan application is processed. It’ll protect you against any rate increases during the loan process.  However, rates may drop after you lock in and prevent you for taking advantage of any decreases during this period. So tread carefully!

Discuss the interest rate outlook with your lender. We don’t hold the crystal ball, but we can share what is being forecasted and how a .125% increase or decrease in interest rate will affect your monthly payment. Once you are under contract the decision to lock in your interest rate is 100% your decision.

Determine the lock-in period with your lender and have them estimate the time needed to process your loan. The lock-in period should be long enough to allow for settlement and any other contingencies within your contract.

Make sure you factor in any possible delays (construction issues, appraisal inspections, etc.). Lock-ins of 30 to 60 days are common but there may be options to lock in for longer than 60 days based on your situation. Usually longer locks are more expensive.

Understand your options if your closing date goes beyond your rate lock period. You may have the options to pay to extend your lock or let the lock expire. Discuss these options with your loan officer.

There you have it—what needs to happen right after you go under contract.  If we work together, we’ll help you through it when we get there, so don’t worry about it too much right now.  Your next step in the homeownership journey is meeting with a few agents to ask them those questions from Week 1—How To Find The Very Best Agent.  We are here for you when you are ready! Contact us at kurrleteam@firsthome.com 3-6 months before you want to even start looking at houses for a stress-free experience.

Next week — How to Navigate a Home Inspection – is the tenth article of this Buying a Home 101 series. You don’t want any surprises after you move in, right?! You’ll get the breakdown of what to expect during your home inspection and what to do if any red flags arise.