How to Complete the Home-Buying Procedure After Finding Your Dream Home
Perhaps one of the best parts of house hunting is finally finding a house that you’d like to buy.
If you’ve spent a lot of time searching and figuring out your must-haves for the perfect home, then it could feel like this step in the home-buying process is the end of the road.
Actually, it’s just the beginning of the end!
Once you’ve found a house that you’d like to buy there are still plenty of things to do until closing.
Here's a timeline of what to expect once you’re ready to close on the home you’ve chosen.
1. Inform Your Realtor
Hopefully, you are working with a real estate agent that is especially knowledgeable when it comes to working with buyers in real estate transaction.
Your agent should help you present a strong offer that will eventually get you to the closing table.
With this in mind, let them know, right away, that you are interested in the property and that you'd like to make an offer.
Your agent should be able to give you suggestions as well as an overall strategy so that your offer is reasonable with the potential to get accepted.
They should also be able to give you a sense of how much above or below asking price you should offer along with any other contingencies or changes to be made in the purchase contract.
2. Review the Offer
Once your agent gathers all the details pertaining to your offer, you should review the purchase contract where you offer is documented.
You want to make sure that it reflects your desires should the seller accept your purchase contract.
If you find anything in the purchase contract that differs from what you discussed, make sure that you bring that up with your agent.
If there are any changes that need to be made to the offer, make sure they are addressed right away. If not, any errors, mistakes or misconstrued information could nullify the purchase contract and take your bid out of consideration.
For this reason, it is extremely important to make sure that all the terms and information presented in the contract are true and reliable representations of your intentions to purchase your chosen property.
Once you feel the offer is air-tight, give your agent the ok to present it to the seller.
Now, it’s time to wait and see if they’ll accept it.
3. Submit Your Earnest Money
If the seller accepts your offer and purchase contract, you’ll be required to put down a good faith deposit known as earnest money.
It simply shows the seller that you are sincere about your intentions to purchase the home.
If putting down money before you actually purchase your home worries you, there’s no need for concern.
Earnest money is actually refundable under many circumstances — especially when you decide not to buy the house after all. It’s also kept in escrow (a trustworthy third party) so there’s no way for the seller to gain access to it until the purchase is final.
Finally, you should know that if you go through with the home buying process, your earnest money is credited to the closing settlement amount.
For example, if you’ve put down $1,000 in earnest money and you need $5,000 to close, you’ll only need to come up with $4,000 at closing.
4. Inform Your Attorney
Now that your contract is accepted and you’ve put down your earnest money, you should know that the clock has started and you are in the attorney review period.
The length of the attorney review period varies from state to state but can be around 3-5 days. If revisions need to be made, it can take longer if extensions are requested by either parties’ attorney.
Your attorney will review your purchase contract just to make sure there aren't any clauses that might hurt you down the line.
However, you should know that during this time, either the seller or buyer can back out of the contract for any reason.
5. Get a Loan Estimate
At this time you should already have some type of pre-qualification or conditional approval in place.
Many real estate agents will not work with prospective buyers whose financing and loan eligibility has not been confirmed by a mortgage lender.
However, once you nail down a property with a specific price point, you should circle back with your lender to make sure you are still within the realm of what you can afford.
Once you supply the bank with a property address, purchase price and other required information for the loan application, they should provide you with a loan estimate.
This document tells you your estimated interest rate, monthly payment, and total closing costs for the loan on the property you’ve chosen.
This loan estimate is not a legally binding document nor does it guarantee that you will actually be approved for financing. This is simply a document provided to you by the lender to help you shop around and compare lender offers quickly and easily.
It’s also worth noting that you should compare loan estimates from different lenders in this step. Studies show that consumers who shop around for their mortgage, get better rates.
Don’t be afraid to get loan estimates from several lenders to improve your chances of getting better rates and terms for your mortgage.
6. Get a Home Inspection
During the attorney review period, you should also be working with a home inspector to go over every nook and cranny of the property.
If there are issues found, you’ll want to address it during this time. If there are extensive repairs needed to fix these issues, you may want to reconsider your decision to buy or seek a price adjustment accordingly.
7. Submit a Revised Purchase Contract
Based on the home inspector’s report on the property, you may find that there's a need to make changes to your initial purchase contract.
This may be a price reduction, asking for seller credits or some other arrangement that satisfies the needs of both buyer and seller in the transaction.
Any changes should be reviewed again by your attorney. Their job is to make sure the sale goes down in your best interest.
So, don't neglect to engage them anytime you'll be making changes to your purchase contract.
8. Continue with the Underwriting Process
If you are a cash buyer this process will not apply to you. If you are financing your home, the bank will still need more information and perhaps even further clarification on any information you've already provided.
In this phase, you might continue providing documentation to the bank so that the underwriter can eventually give you what’s called your clear-to-close.
They may ask about large deposits on your bank statements or to confirm your identity in different ways.
Additionally, you may have to present further evidence of employment with check stubs, W-2s, tax returns or other information regarding your current debt obligations.
They will definitely run a credit report and ask about any adverse information they find.
Assuming you get past this step and receive a loan commitment letter from the bank, they may now order an appraisal and ask you to obtain homeowners insurance on the property in preparation for closing.
9. Review Your Closing Disclosure
Once the underwriter has confirmed that you are clear to go to the closing table and take possession of your home, then you can expect to complete that process relatively soon.
About 3 days before closing, you should receive a closing disclosure document that looks very similar to the loan estimate you would have received when you informed your lender about the specific property you’d buy.
You should look over this document closely. Here, you will find out how much money you need at closing (or if you are getting money back) along with the final terms of your loan.
If there are any changes from the initial loan estimate you received while rate shopping, then there should be a detailed explanation from the bank as to why there are differences.
If you do not understand something in the closing disclosure, make sure that you ask your lender about your loan terms before you come to the closing table.
10. Close and Take Possession of Your Home
Closing may occur at a title company or a lawyer's office.
Perhaps the day before or the day of closing, you will complete a final walk-through of your property. If all goes well at the final walk-through, then you should finally be ready to close
Be prepared to bring proper identification as some documents may require notarization.
There will be many things to sign and you should be prepared to present the funds needed to close the transaction per the closing disclosure.
After all the paperwork is signed and fees are paid, you should receive your keys and be prepared to take possession of your property.
Congratulations, you’ve just purchased a home!