Buying a home can be a confusing process, especially if you have not bought a home before. So lets try to explain the home buying process.
The first step a prospective homebuyer wants to do is get pre-approved for a home mortgage and obtain a pre-approval letter from the lender. This letter will tell the buyer how much he can spend on a new home, based on the amount of loan the can borrow.
With the pre-approval letter in hand, the buyer can now work with a Realtor to find homes for sale that meet his criteria. Most buyers will first narrow a list of homes down to the area of town they would like to live in. This may be due to proximity to a job or entertainment, top-rated schools, or other. Then, you can further narrow down based on price, size and features.
Once you have a few homes in mind, your Realtor will schedule some appointments to view these homes. When you find the one you want, the Realtor will put your offer down on an official contract and present to the seller. If accepted, then you are under a legal contract to buy the home. Of course, the seller can always reject your offer and make a counter offer.
Once you have a contract, you will then be required to pay a small good faith escrow deposit to the title company who is conducting the closing. This can be as low as $2000 or $3000. The title company is an independent party who is responsible for putting together all the paperwork to transfer title. It normally takes 30 to 45 days to close the purchase.
During this period, there is actually a lot that gets done. The title company will search the public records to determine whether there are any liens on the property or clouds on title. If so, they will work with the seller to clear them. The buyer also has work to do – work with the lender to provide any documents necessary to get the loan and inspect the property for problems.
The pre-approval letter that the buyer received in the beginning was just a general statement from the lender saying that a loan would be provided based on the accuracy of the basic information given. Now, the buyer must support his original statements with bank statements, employee records, tax returns, and so on.
The buyer will also want to have a home inspector do a complete inspection of the property soon after the contract is signed. He will check the plumbing, electrical system, AC, roof, water leaks, structural integrity, and more. If there are any problems, then buyer must bring this to seller’s attention and request seller to fix the problems or re-negotiate the purchase price due to the needed repairs. Most purchase contracts give the buyer a due diligence period of at least 15 days, in which buyer can cancel the contract for any reason. This is why the home inspection must be done soon.
But if all is well with the inspection and the lender approves the loan, then it’s time for the closing. Typically, the parties will meet at the title company offices, sign documents and then buyer gets a deed and keys. That’s it!
Of course, there are frequently other issues that arise during the process. For this reason, it’s a good idea to have a real estate attorney assist you through the process. And if your Realtor is also an attorney then the attorney may not cost you a dime!
