The process of buying a home can be a very overwhelming time in your life and that's why I want to share with you these 10 steps to homeownership to simplify the process. If you have any questions regarding this process, please don't hesitate to call me!
1) Pre-Qualification - The first step for all purchase transactions. It’s a good idea to get pre-qualification before you start looking at houses, that way you’ll know what you can afford. During the pre-qualification process, the bank or mortgage company you chose will gather information about your income, job history, residency, liquid assets, credit scores and make a financial determination about how much house you may be able to afford. They will send you out your pre-qualification letter in the mail along with a list of documents that you would need in order to submit your loan application. It’s important to start putting together the list of documents right away!
2) House Hunting - This is the “fun” part! Now that you know how much money the banks will approve you for and have a better idea of what type of monthly payment you will be required to pay, you can start going out and looking at different properties. It’s always a good idea to hire your own buyer’s agent. A buyer’s agent does not cost you anything, and is working in your best interest. The seller of the home that you may be interested in buying pays their agent who in turn will pay your buyer’s agent.
3) Writing an Offer to Purchase - You’ve found the house of your dreams and your buyer’s agent will now help you write up an offer to purchase. You’ll typically need to attach your pre-approval letter and a deposit check to show that you have full intentions of buying this property; usually $500-$2000.
4) Home Inspection - In the offer, there should be a home inspection contingency, you will usually have 7-10 days to have a home inspection completed. A home inspection costs anywhere from $200-$500. It is very important to have a home inspection done, because it will point out any problems with the house, if any. If during your home inspection, the inspector finds any major problems, you can still back out of the deal and get your deposit money back or you can negotiate with the seller to get the problems fixed.
5) Application/Processing - Once you have a house picked out and your offer to purchase has been accepted, it’s time to actually apply for a mortgage. Hopefully by now, you’ve organized all of the documents the bank requested when they pre-approved you. Various fees and down payments are discussed at this time and you’ll receive a Good Faith Estimate (GFE) that itemizes the rates and associated costs for obtaining the loan. Once the bank receives all the requested documents they will submit you loan for underwriting.
6) Underwriting/Approval - The underwriter is responsible for determining whether the loan application package that you submitted is deemed as an acceptable loan. If everything looks good to the underwriter, then he/she will approve your loan and send you a list of outstanding documents that they will need before issuing your commitment letter. Most banks will approve a loan within 1-2 business days depending on how busy or slow they are. On a typical loan approval, the underwriter may ask for documents such as the appraisal, fully signed P&S, title work, missing income/asset documents, etc…
7) Purchase & Sales Agreement – Once your loan is approved and you have a mortgage acceptance letter, the sellers attorney will prepare the Purchase and Sales Agreement. After your attorney reviews the purchase and sales agreement both you and the seller will sign it! At this time you’ll submit your second and last deposit check to the seller’s real estate agent.
8) Once all of the approval contingencies, if any, are met and the bank completes its due diligence on the property (title search, appraisal, survey etc.), your closing time and place will be scheduled. You’ll need to get a bank check addressed to yourself once you get you the final dollar amount of what you’ll need to bring to the closing. You can expect the final numbers a few days before your closing is scheduled.
9) Final Walkthrough - The walkthrough usually happens the day of or the night before the closing, your buyer’s agent will take you to the house and go through everything to make sure it is in a condition that was agreed upon in your original offer to purchase.
10) Closing - At the closing, you will sign the mortgage papers and the lender "funds" the loan with a certified check or bank wire to the selling party in exchange for the title to the property. This is the last step of the loan and home purchase process. You’ll receive the keys from the seller(s) now and congratulations, you’re a homeowner.