STEP 7 - DUE DILIGENCE - Pt. 2

This is part 2 of the due diligence period. It’s time to tackle what the lender needs to approve your mortgage. This part might sound a little boring, but trust me... it’s super important. Without your lender’s stamp of approval, your dream home stays just that, a dream. Think of your lender as the gatekeeper to your future house, and meeting their requirements is the key to unlocking that front door. Procrastination here could lead to major headaches later, so it’s crucial to get everything done as quickly and thoroughly as possible.


Your lender is going to ask for a bunch of documents... everything from pay stubs to bank statements. They’re just making sure you’re financially ready to take on the responsibility of owning a home. It's like you're in the home stretch of a marathon, so don’t slow down now. Get them what they need so you can breeze through the finish line (aka closing day) and finally get those keys in your hand. Your dream home is so close!

DUE DILIGENCE CHECKLIST

The Due Diligence Checklist:

1. Homeowners Insurance

  • Coverage Required by Most Lenders: While homeowners insurance isn’t required by law, your mortgage lender will almost definitely require it before they’ll finalize your loan. Homeowners insurance protects both you and the lender from disasters—whether it's a fire, theft, or damage from a storm. This coverage ensures that if something happens to the home, there will be money to repair or rebuild it. Without it, your lender might worry that they’re risking their investment.
  • Flood Zones and Special Risks: If your dream home is in a flood zone, near the coast, or in an earthquake-prone area, standard homeowners insurance won’t cut it. You’ll need special policies to cover these risks. For example, if your house is in a flood zone, you’ll need flood insurance—which can be an extra cost. It’s important to find out this information ahead of time so you can budget properly and avoid any surprise bills after you’ve moved in. The last thing you want is to discover you need extra coverage during a hurricane warning!

2. Home Appraisal

  • What It Does: A home appraisal is like the reality check for your home purchase. A professional, third-party appraiser inspects the property and compares it to similar homes in the area, determining its true market value. This step ensures you’re not overpaying for the house, and the lender isn’t lending you more than the home is worth. The appraisal looks at everything from the home's size, layout, and condition to upgrades, amenities, and the overall location. It helps protect you and your lender from paying too much for a property that isn’t worth it.
  • What Happens If the Appraisal Is Low: If the appraisal comes back lower than the price you’ve agreed to pay, you have several options:
  • 1. Request another appraisal: If you think the appraiser made a mistake or missed key features of the home, you can ask for a second opinion. Errors happen, and it’s your right to make sure the home’s value is accurate.
  • 2. Renegotiate the price: If the appraisal shows the home isn’t worth the price you’re about to pay, use that information as leverage to renegotiate with the seller. Why pay more than what the house is worth? You can often get the price reduced to match the appraisal.
  • 3. Pay more upfront: If you’re absolutely in love with the house and the seller won’t budge on the price, you can cover the difference out of your own pocket. This means you’ll need to put down a larger down payment, but it might be worth it if you can’t imagine living anywhere else
  • 4. Cancel the contract: If the numbers don’t add up and there’s no compromise to be had, you can walk away from the deal. If your contract has an appraisal contingency, you can cancel the purchase without losing your deposit, which saves you from getting stuck in a bad deal.

The Bottom Line...

All of these due diligence tasks that the lender requires may feel like a lot of extra work, but thankfully, we know exactly who to call and how to get these things done. We're like your personal tour guide through this maze of inspections, appraisals, and insurance forms. We’ve got your back every step of the way.


When the big day finally comes to sign the closing documents, you’ll be able to relax knowing you’ve done everything you can to ensure your new home is in great shape and free from any hidden problems. Peace of mind is priceless!

WHAT DO YOU DO NOW?

Don’t wait... NOW is the time to act! Go through each step of this due diligence period and satisfy your lender’s requests. Without completing these simple taks, your mortgage loan probably won't be approved.

SO WHAT'S NEXT?

Great job so far, and now it is time to proceed to the next step. The next step is all about doing one more last minute inspection... by you and your realtor. So, click the link below to go to the next step.