Your home may be the largest single purchase you make in your lifetime. You will likely take 20-30 years to pay it off.
Therefore, it is vital that you structure your purchase agreement properly. These are a few things you should look for in your real estate contract.
How you will finance your purchase
When you purchase a home, you will either pay cash or get a mortgage loan. You may also opt for seller financing or taking over the current mortgage. Whatever method of payment you choose, be sure it is clearly discussed in your sales contract.
Who will pay the closing costs
At the close of your purchase, you will likely be responsible for paying closing costs and other fees, which can be up to 6% of the loan value. However, you can negotiate that the seller pays all or part of this amount. Make sure the contract reflects these figures.
What contingencies you require
Include an inspection contingency in your contract that allows you to back out if the inspection is unsatisfactory. An appraisal contingency is also valuable because many mortgage companies will not lend you more money than the property is worth. Therefore, if the appraisal is lower than the purchase price, you may need to get out of your agreement.
You also need a financing contingency, especially if you cannot pay in cash. This prevents you from locking yourself into a contract without a way to pay for the home. If you already own a home you are trying to sell, you should also include a home sale contingency.
To protect yourself financially, learn about the key aspects of your purchasing contract. Things as small as replacing fixtures and appliances or an unexpected closing date can cost you significantly.