A home appraisal is an unbiased estimate of a property’s market value, conducted by a licensed appraiser. The appraiser will compare the home to similar recently sold properties in the area (known as “comps”), assess the condition of the property, and take into account factors like location, square footage, features, and upgrades. Lenders typically require an appraisal before approving a mortgage to ensure the home is worth the purchase price. If the appraisal comes in lower than the contract price, buyers may need to renegotiate with the seller, bring additional funds to closing, or challenge the appraisal.

The required down payment depends on the loan type and the buyer’s financial situation. Conventional loans often require between 3% and 20% down. FHA loans usually require 3.5% down if you meet credit score guidelines, while VA and USDA loans may offer 0% down payment options for qualified borrowers. While a 20% down payment can help avoid private mortgage insurance (PMI) and lower monthly payments, many buyers purchase homes with much less.

A home inspection is a professional evaluation of a property’s condition, typically performed after the purchase contract is signed but before closing. The inspector checks major systems such as the roof, foundation, electrical, plumbing, HVAC, windows, and appliances. They look for structural issues, safety concerns, and needed repairs. The inspection report helps buyers understand the true condition of the home and may provide leverage to negotiate repairs or a price adjustment.

Private Mortgage Insurance (PMI) is required on many conventional loans if the buyer puts down less than 20%. To avoid PMI, buyers can:

• Make a down payment of at least 20%

• Choose a lender-paid mortgage insurance option (though this may come with higher interest rates)

• Use a piggyback loan (80/10/10 loan structure)

• Explore VA loans, which don’t require PMI for qualified veterans and active service members
  Paying down the mortgage until reaching 20% equity can also eventually eliminate PMI.

Beyond the standard home inspection, buyers can request specialized inspections for added peace of mind. These may include:

• Radon inspection to detect hazardous gas levels

• Mold inspection to check for hidden growth and air quality issues

• Sewer line inspection using cameras to look for blockages or damage

• Well and septic inspection if the property uses these systems

• Chimney inspection for safety and functionality
  While not always required, these inspections can save buyers from costly surprises later.

Getting prequalified is the first step toward understanding your buying power. It typically involves providing a lender with basic financial information—such as income, employment, debts, and assets. The lender will then give you an estimate of how much you may be able to borrow. Prequalification is usually a quick process and can often be done online or over the phone, but it’s based on self-reported information and doesn’t carry the same weight as a preapproval.

A termite inspection evaluates a property for evidence of termites or other wood-destroying insects. A licensed inspector will check the foundation, crawl spaces, wood structures, and other vulnerable areas. Many lenders, especially with VA loans, require a termite inspection before approving financing. Even if it’s not required, it’s a smart step because termite damage can be extensive and costly to repair.

In addition to the down payment, buyers should budget for several upfront costs, often referred to as “closing costs.” These may include:

• Loan origination fees

• Appraisal fees

• Home inspection costs

• Title search and title insurance

• Attorney or closing agent fees

• Property taxes and homeowners insurance escrow

• Recording fees and transfer taxes
  Closing costs typically range between 2% and 5% of the home’s purchase price. Having cash reserves for these expenses is essential.

• Prequalified: An informal estimate from a lender based on self-reported financial information. It gives you an idea of what you might be able to borrow but isn’t verified.

• Preapproved: A more in-depth process where the lender reviews your income, credit report, employment, and financial documents. Preapproval results in a conditional loan commitment, making your offer stronger when competing for a home. Sellers often prefer buyers who are preapproved, as it shows serious intent and financial readiness.

Title insurance protects buyers and lenders against potential issues with a property’s title, such as undisclosed liens, ownership disputes, errors in public records, or fraud. There are two types of policies: lender’s title insurance (which protects the lender) and owner’s title insurance (which protects the buyer). While lender’s coverage is usually required, owner’s coverage is optional but highly recommended, as it ensures your legal ownership is protected.