10 Laws You Need to Know When Buying a Home


There are many laws that govern the home-buying process. Before you even begin looking for a house, it’s essential to know what you’re getting yourself into so that your search goes smoothly.

You’ve probably heard about the ten most important laws that you need to know before buying a home, but what are they? Keep reading to find out!

1. A Mortgage Broker Can’t Misrepresent Anything About Your Loan

Lenders can’t do anything dishonest when it comes to your mortgage, so if they commit fraud or aren’t forthcoming with information, this is considered breaking the law.

Contact the Federal Trade Commission (FTC) if you think your broker has done something dishonest or illegal during the loan process, contact the Federal Trade Commission (FTC). Fraudulent lenders risk losing their license and facing hefty fines.

It’s essential to hire a trusted mortgage lender who will guide you through the process and provide the best mortgage rates.

2. Lenders Can’t Require You to Get an Appraisal

Although it may seem like an excellent idea for the lender to get an appraisal on your house before you close, this law says they can’t require one. It’s also illegal for lenders to make threats such as “if you don’t take our offer, we won’t be able to lend you the money because an appraisal will increase the price.”

The buyer pays the appraiser in a private arrangement, so if this does happen and you’re not comfortable with it, talk to a lawyer or write a letter to the Department of Housing and Urban Development (HUD).

3. It’s Illegal to Pay for Your Own Appraisal

You can’t pay for your own appraisal to make the house appear like it’s worth less than it is to get a loan or any other reason.

This could be considered mortgage fraud and will result in legal action. In fact, the appraisal is an integral part of the mortgage process — it’s how lenders know what a home is worth and if they’re going to approve the loan.

4. You Can’t Be Forced Into Paying More Than Just The Principal And Interest

Although many buyers are used to paying private mortgage insurance (PMI), when they finally own enough of the home that PMI isn’t necessary anymore, they’re still stuck paying it because their lender tells them they have no choice in the matter.

If your lender won’t lower your payment once you have 20% equity in the home, this law makes it illegal for them to force you to pay more than just the principal and interest.

5. Lender’s Notification is Important

It’s illegal for a lender to send your payment directly to a collection agency without notifying you first.

If they don’t, this is considered a violation of the federal Fair Debt Collection Practices Act.

6. You Can’t Be Held Liable For Your Partner’s Credit or Loan History

Although you did your best to review your partner’s credit and loan history before moving in together, there’s no way to know how well they’re going to take care of these things from here on out.

This law makes it illegal for lenders to hold you liable for their mistakes, so if your partner fails to pay the mortgage and you have nothing to do with it, you won’t have to worry about facing foreclosure along with them.

6. Lenders Must Decide on Loans Within a Reasonable Period

You can’t leave creditors hanging for weeks or months when they’re trying to give you money!

If your creditor doesn’t decide on your loan within a reasonable period, it’s considered a violation of the federal Fair Credit Reporting Act.

7. Both Parties Must Sign Documents Before They’re Considered Valid


Certain documents need to be signed by both parties for a lender to consider them valid and enforceable in a court of law, such as a power of attorney or an authorization form.

If these aren’t signed before they’re submitted, this law makes it illegal for them to be used against you later on down the road.

8. A Seller Can’t Refuse to Accept “As Is” Offers

Making an “as is” offer lets the seller know that you’re aware there are no guarantees on the house and are still interested regardless.

This law allows them to accept your best offer without fear of being held responsible for things they weren’t aware of when accepting your offer.

9. Lenders Must Write Off Unpaid Principal After Foreclosure

Although lenders aren’t required to do this, if they choose not to write off any unpaid principal balance following a foreclosure, it could be considered an unfair practice under the federal Real Estate Settlement Procedures Act (RESPA).

10. A Seller Can’t Make You Pay Their Closing Costs Unless They’re Listed in the Contract of Sale

Unless they’re listed in the contract of sale, a seller has no right to ask you to pay their closing costs, such as appraisal, inspection, and loan fees.

This law covers all states except for Alabama, Arkansas, Georgia, and North Carolina.

There are many laws that govern the home buying process, but you don’t have to worry about them because we’ve compiled a list to help you out.

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