Dawn Heidlebaugh
Got Questions?

The first step is understanding your budget and getting pre-approved for a mortgage. Once that’s in place, you’ll have a clearer idea of what homes you can afford, and the search can begin!

Prequalification is a fast, informal estimate of what you can borrow based on what you tell the lender. Pre-approval is a formal commitment where the lender checks your credit and verifies your documents to give you a specific, conditional loan amount. Pre-approval is much stronger, showing sellers you’re a serious and capable buyer.

When budgeting for a home, you must plan for three main categories of expenses beyond the purchase price:

1. Upfront Closing Costs

These are one-time fees paid to finalize the purchase and loan, typically ranging from 2% to 6% of the loan amount.

Key items include:

• Appraisal and Inspection Fees: To verify the home’s value and condition.
• Lender Fees: Including the Loan Origination Fee to process your mortgage.
• Title Fees: For insurance and searches to ensure clear ownership.
• Escrow and Attorney Fees: For the professional handling the closing.
• Prepaid Expenses: Initial payments for property taxes and homeowners insurance.
• PMI (Private Mortgage Insurance): Required if your down payment is under $20\%$ on a conventional loan.
• Moving/Setup Costs: Expenses for moving services, new furnishings, or utility connections.

2. Annual/Recurring Costs

These are fees for maintaining the right to own and protect your property:

• Property Taxes: Annual or biannual fees paid to the local government.
• Homeowners Insurance: Required by lenders to protect against damage.
• HOA Fees: (If applicable) Monthly or annual fees for common area maintenance.

3. Ongoing Monthly Costs

These cover the costs of living in the home:

• Utilities: Monthly bills for electricity, gas, water, internet, etc., which vary by home size and efficiency.
• Maintenance & Repairs: You should budget for routine upkeep (like yard work) and unexpected emergency repairs.

Absolutely. A home inspection provides a detailed look at the condition of a property, helping to identify any potential issues that might not be immediately apparent. It’s a small investment that can provide significant peace of mind.

If the appraisal comes in low (less than the agreed-upon price), the deal faces a snag because the lender won’t finance more than the appraised value. The buyer must then cover the appraisal gap (the difference in cash) or find another solution.

The buyer has three main choices:

1. Renegotiate the sale price with the seller.
2. Pay the difference out of pocket in cash.
3. Walk away from the deal, provided they have an appraisal contingency in the contract, which allows them to get their earnest money back.