Buying a home differs from any other kind of purchase.
Once you make an offer on a house, the lender will insist on a home inspection - for your benefit and theirs.
"Their purpose in doing that is to insure that the home has no major defaults that may cause them not to be interested in purchasing or moving forward, to find that the value may not be there," said Daniele Leong of the Central Pacific Bank Homeloans division.
Generally speaking, a home inspector is a third party outside the transaction - someone without a vested interest in the transaction.
"As the property inspection is done by a licensed inspector, a report is produced so that the buyer has the opportunity to review it and to see how they want to move forward - if they are going to request repairs from the seller or if they want to cancel the transaction," said Leong.
Once the home inspection is done, another party becomes involved - the appraiser. The lender must have the property appraised to determine the value of the loan.
"The appraisal is very important," said Leong. "What we're looking for is the value in the home to justify the loan amount for the purchase price. The buyer typically comes in with 20 percent and the 80 percent of it's financed. That's the typical situation. So the appraisal needs to come to that amount or more."
This part is a little tricky - new homebuyers - - or sellers for that matter - may see the entire appraisal process as somewhat of a mystery. It doesn't have to be that way if you understand the process.
"The appraiser will go and look at the properties that have sold in the neighborhood, check out their values, see what the condition of the home is and essentially try to match like for like and then determine the condition of the home to make sure that its value is there," said Leong.
Next Friday, we'll learn more about the final steps in the home buying process - including the title search and what to expect on the day the sale closes.
