The first installment of this article started your process by speaking to a lender to answer questions and establish what price range you should be looking in to keep your payment firmly in your comfort zone. Next, we moved through the home search to the negotiation, two stages that will likely leave you appreciating your Realtor. Just wait, though, because your Realtor, Loan Officer, and a cast of many others are about to put on a show!
Once your contract is accepted and ratified, you may have to go through some more paperwork for the loan and update or provide more documentation, but the next big step is the home inspection. A home inspection is almost always recommended and is typically performed within a few days of the contract being signed. Even if you are buying a newly constructed home it is a good idea to get a home inspection. No home, new or existing, is perfect. If major issues are found and you have included a home inspection contingency in your contract, you can renegotiate with the seller to determine who will pay for the necessary repairs. If you cannot come to terms, you may be able to withdraw from the contract with no penalty.
A few additional inspections will be going on behind the scenes, coordinated by your Loan officer, the Realtors, the settlement agent, and several third-party providers. Two of the most significant are an appraisal and a title search. The appraisal report provides a lot of technical information about the home and several potential values of the home utilizing different methods of determining value. The most important method is based on the sales prices of comparable home in the area that have sold recently.
The title search is an inspection of the title history of the home. The purpose is to ensure that the title is “clear,” meaning there are no unresolved liens recorded on the home, previous transfers are documented properly, and no other deficiencies exist which could potentially bring any future questions of ownership or debt. Lenders require title insurance and you will be offered a homeowner’s title policy to insure against any future claims, but the insurance company requires a clear title search before they will issue a policy.
There are a few other inspections that may or may not be required:
- Survey. A survey involves identifying the boundaries of the property and ensuring they are properly marked. A survey report includes a scale drawing and precise location coordinates and measurements, among other things.
- Pest Inspection. Also referred to as a termite inspection, a pest inspection is looking for evidence of previous or current pest infestations.
- Well & Septic Test. A well & septic test is typically required if the home has a well and/or septic system. The systems will be checked to ensure they are functioning properly and the water will be examined by a lab to ensure it is potable.
- Contractor & Engineer Inspections. Though not very common, sometimes inspections by professional contractors or engineers is recommended or required. This typically happens when the home inspector or appraiser notices a potential issue that should be evaluated by a specialist. Common examples may include foundation, roof, or HVAC issues.
5. Loan Processing and Underwriting
We will list this here, but in reality this is usually going on throughout much of the whole process. From the first time you speak to your Loan Officer they are working to get you approved and ready to close on your home. The pace tends to quicken after your contract, however, since the inspections can be ordered and exact numbers (as well as an address) can be added to the application.
Most of the process will be managed by your Loan Officer and processor. The most important thing you can do throughout the process is respond as quickly as possible to requests for any additional documentation. Contrary to popular belief, everyone at the mortgage company, including the underwriter, really do want you to get the loan. At the same time, everyone at the mortgage company is legally obligated to prove you have the ability to repay the loan; which means everything must be documented.
Also known as “closing”, settlement is where all the final documents are signed and the home transfers from the current owner to you. The actual event can vary in how it is carried out. Sometimes the buyer and the seller are at the same table at the same time; sometimes the seller signs somewhere else before the buyer. Either way, you will typically need a photo ID and a cashier’s check for any money you are required to pay out of pocket to complete the transaction. After signing your name on the line dozens of times, the home is yours!
Obviously, this is a very brief description of the process but the truth is that the actual process often varies. A real estate transaction may be the closest example of herding cats that truly exists. Fortunately, I can work with a great Realtor to help guide you through the process and achieve your goal of homeownership. Whether you are ready to get started or are just thinking about it, do not hesitate to contact me.