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Why You Should Get a Home Inspection Report if You Get a Mortgage

Why You Should Get a Home Inspection Report if You Get a Mortgage

  • Home Inspection Report Overview
  • A home buyer typically orders a property inspection report after his or her offer to purchase has been accepted by the property seller.  Home inspection reports are not mandatory and the property buyer decides if he or she orders one.  In some cases the property seller provides a home inspection report to all prospective buyers but we recommend that home buyers order their own, independent report.

    When you order a property inspection make sure you are working with a licensed, reputable inspector. We recommend that you use client references and referrals to find a capable and qualified inspector. Spending extra money on a property inspection can help you avoid finding significant issues with the property after your purchase closes and save you thousands of dollars in the long run. Property inspection reports are usually several hundred dollars so they are a worthwhile investment compared to the cost of significant home repairs or renovations.  Additionally, in some cases you may be able to negotiate a lower property purchase price based on the inspection report findings.

    The property inspection is performed by a licensed professional who identifies potential issues with the property such as termite damage, electrical or plumbing defects, structural issues or a roof that needs repair. After reviewing the inspection report, the buyer and seller negotiate who pays for any issues that need to be addressed prior to completing the sale of the property. In some cases a seller may be willing to pay for all of the required repairs while in other cases the seller may not be willing to pay for any of the required repairs.  Either way, it is much better to be aware of any significant issues before you buy the property.

  • How a Home Inspection Report Can Affect Qualifying for a Mortgage
  • It is important to identify any property issues that need to be addressed at the start of the process so that they do not delay or prevent you from closing your mortgage.  The lender orders an appraisal to determine the value of the property and in some cases the appraiser may identify issues with the property that need to be corrected before you receive final underwriting approval.  For example, the appraisal report may note roof damage that the lender requires you to repair as a condition to your mortgage closing.  Repairing the roof damage may cost thousands of dollars and take weeks to fix.  

    In short, an inspection report enables you to learn about property issues before they are identified in the appraisal report. That way you know about any significant property repairs before the lender does and you can be proactive in addressing them or negotiating fixes with the property seller. Knowing about issues early on enables you to avoid being surprised by any additional costs or delays in the mortgage process.

    Additionally, if there are multiple issues with the property it may result in a lower appraised value which can make getting a mortgage more difficult. When the appraised property value is less than expected this is known as the appraisal coming up short. In this situation you may be required to increase your down payment, lower your mortgage amount or try to negotiate a reduced purchase price with the seller. These are the last things you want to be doing in the middle of getting a mortgage. In a worst case scenario, significant property damage issues can cause your mortgage application to be rejected.  A home inspection report enables you to address issues before you apply for your loan or at least be aware of them so unexpected surprises are diminished.

    The best approach for the borrower to take is to identify and address any significant home inspection issues early in the home purchase process so that they do not interfere with your mortgage being approved.

  • Rate Details*
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    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
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    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Great Mortgage IdeaRelated FREEandCLEAR Resources
  • Sources

    Home Inspection Report: http://myhome.freddiemac.com/buy/home-inspection.html

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR. More about Harry

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