After the Offer: How to Choose Required Services

Estimated reading time: 5 minutes

During the purchase of a home, several other service companies may need to be involved. Some of these additional types of companies and services include:

While not all of the above will be necessary in the purchase for your new home, you will most likely need a mortgage, inspection, title insurance, and a homeowner’s insurance binder. This article will explain what each service is for and what to look for when shopping for the best provider.

MORTGAGE
Before deciding which property to buy, you must make a preliminary but critical choice of which mortgage lender will give you the best loan. That lender can provide your first “ticket” to proceed with a future offer – the pre-approval letter. This letter, produced by the lender, specifies the upper dollar limit that can be financed, and it really helps to have one handy when making an offer – especially in a competitive market. In order to get a pre-approval letter, you will need to provide some basic financial information, and your credit report will likely be used to assess your creditworthiness and grant you pre-approval.

The mortgage interest rate is a critical factor in choosing between lenders, but it’s not the only one. The best loan may, in fact, have a slightly higher rate but considerably less in closing costs or other fees such as one-time “points” on the loan. Consider all aspects of additional closing costs, including mortgage insurance, when determining what’s best for you.

One of the best ways to find a good mortgage lender or bank for a loan is to start with your own bank because they might offer special rates and fees for existing customers. It’s also easy to search online and find lenders and websites that aggregate and compare loan and mortgage broker information. Ask friends for their recommendations. And, of course, ask me which lenders I’ve worked with and who I would recommend!

TITLE INSURANCE & CLOSING/SETTLEMENT
Title insurance protects against losses by defects in the title of the property. The Owner’s Policy protects the new buyer of the home, while the Lender’s Policy protects the lender providing the loan to the new buyer, and most lenders will require a lender’s title insurance policy. While it is customary for the seller to pay for the owner’s title policy and the buyer to pay for the lender’s policy, it can vary by location, even within a large metropolitan area. The choice of a title service company to be used also can vary by location. In some cases, the buyer can choose the title company, while in others, the seller or even the lender may choose. Just ask me, and I will let you know what your options are and who will be paying for the policies.

SURVEY
Occasionally, there may be issues with the title to the property requiring an experienced, certified surveyor. For example, the property may have been the subject of easements not reflected in the current title, and the title company may need to engage a surveyor who will actually visit the property, take measurements as needed, and report back to the title company with the findings from the survey. Again, this doesn’t often occur, and there may be an additional cost for the survey. The title company should inform you if that’s the case.

HOMEOWNER’S INSURANCE
Lenders also require homeowner’s insurance as a condition of the loan. First, you should choose a homeowner’s insurance company. If this is the first time that you are buying a property, ask friends, relatives, or other advisors if they have a recommendation for a homeowner’s insurance company or you may search for homeowner’s insurance online.

• Always get written quotes, including costs, coverage amounts, and other terms and conditions, and ask how much the premium would change if the deductible is increased. Oftentimes, your automobile insurer will give you a “package” discount when providing a quote to you.
• Consider the company’s reputation for covering claims if something happens to the home. The least expensive rate is not necessarily the best rate.
• Show the loan officer one or more quotes to ask if they meet the lender’s homeowner’s insurance coverage requirements.
• If the home is on the water or in a government-designated flood plain, you’ll also need flood insurance which could complicate matters in obtaining the necessary insurance coverage to satisfy the lender’s insurance requirements.

Finally, choose a homeowner’s insurance company and policy, and send the binder as soon as possible to the loan officer before the closing date. As always, you may contact me for advice and recommendations as you move closer to the closing date.

IMPORTANT NOTICE: Cybercriminals are always trying to hack email accounts and send convincing, sophisticated emails with fake wiring instructions. Never trust wiring instructions sent via email. Always confirm wiring instructions independently in person or via a live phone conversation to a trusted and verified phone number before the wire transfer is initiated. Never wire money without double-checking in person that the wiring instructions are correct. If you are asked to wire monies before closing, be sure to call me first to verify that the recipient information is accurate.