Be aware of unintentionally changing the purchase price. This can happen in several different ways. For example, if the seller agrees to provide a “credit of $1,000.00” to repair some deficiency discovered by the home inspector, this is a change in the purchase price. The price has now been reduced by $1,000.00. If we are acting for your lender (and most times we are), we must notify your lender of this reduction in the purchase price. That may trigger the lender to reduce the amount of your mortgage. If your mortgage involves mortgage insurance, the mortgage insurance premium can increase which can also reduce the amount of mortgage money available. For example, if you are obtaining a 95% mortgage and the seller gave you a credit of $1,000, the amount of your mortgage must be reduced by $950.
Three consequences can arise:
- The cash required from you to close the deal is essentially the same even though the total price has been reduced.
- If we have already prepared the mortgage and must prepare a new one, there will be additional legal fees.
- These changes, if done at the last minute, can delay completion of the purchase.