Buying a new house can be a source of great anxiety about all kinds of things, and especially about the legal implications of the contract, as well as the rights and options you have as a buyer. Not many home owners can afford a whole legal team to have their backs and sort out all the problems which may arise with the house’s mortgage, but we have comprised a guide for dealing with the most pressing issues you should watch out for. A transaction like this can be a vulnerable moment in your credit history, and you need to make sure that you look at the facts from every angle in order to take the best approach. The default support of the current legal system for mortgage issues is still lacking in many ways, so information is really the best defense anyone has.
For a lot of home buyers, a burning issue is the difference between the contract price of a house and its appraised price. What should you do if you’re one of the prospective home buyers who discover that the desired house’s contract price is higher than its appraised one? There are three possible ways to go in this kind of situation. Let’s have a look at each one, so you can then decide which one fits your current situation and needs best.
1. Just cancel the transaction.
At least in theory, you should be able to do that, if that’s what you really want or if the price difference is high enough to justify this decision. The contract of all home buyers, no matter the specifics, should include a clause which allows you to cancel the transaction in the early stages, once you realize the price difference between the contract and the assessment. If you weren’t particularly fond of your new house, or have any other reason to keep it, this is perhaps the simplest way to avoid the extra costs arising from this difference.
2. Pay the difference out of your own pocket to keep the same loan-to-value
If you care about the house a lot and already got used to the idea that this is where you and your loved ones will spend your days, you could consider keeping it. But to keep the same loan-to-value despite the difference between the contract price and the assessment price, you could choose to pay the difference out-of-pocket. Home buyers usually want to make sure they stick with the same value for their monthly payments, so if you don’t want to be taken by surprise by future additional costs, this is the way to go.
3. Keep the same down payment, but prepare for potential future costs
If you want to keep the house, but don’t want to pay for the price difference yourself, there is also this third option. Among the mortgage questions we receive, this is the most tricky to answer in a one size fits all manner. The option exists, but the exact future implications for your finances differ from case to case. The best way for home buyers to proceed in this third case is to make sure they’re protected from mortgage rates skyrocketing, and this is done by securing good mortgage insurance. A wisely chosen deal can protect you from unforeseen additional monthly payments which may arise from this difference between the contract price and the assessment price