Congratulations! After countless home tours and months of searching, you've finally made an offer that was accepted by a seller. You're on the home stretch to homeownership! But what happens now? What do you need to do to make sure that the offer you managed to get accepted makes it to the closing table?
There are many steps one has to take between deciding to purchase a home and actually closing on one. When you're ready to start the process, the first thing you need to to is get pre-approved for a mortgage from a qualified lender. The letter from the lender is your best bargaining tool when competing with other buyers.
The next step is the home search. Where do you want to live? What aspects of the property or the community are most important to you? What is your budget (often the most important point)? Are you looking on your own, or are you using a highly qualified, expert Realtor® to help you navigate all the ins and outs? (As a highly qualified, expert Realtor® I hope you choose the latter, and preferably choose me!) Having someone on your side can be a big help.
And now we're back to where we started. You found the perfect spot, and your offer was chosen over all the other ones (again, having a strong lender and agent on your side really can be a big boost when making offers).
When your offer is accepted you have about ten days to get a home inspection done and get the Purchase and Sale agreement signed. And in a competitive market, that window may be even shorter. The inspection tells you about the home. What needs to be addressed immediately? What can wait? Is the roof leaking? Is the electrical system updated? Are there any cracks in the foundation leading to water damage? If you need the seller to repair anything, this inspection will highlight those needs. The repair list becomes a condition of the sale.
The P&S is really the thing that binds you and the seller together in the transaction. It spells out all of the specific obligations you and the seller need to accomplish and adhere to. It also ties a portion of your down payment to the transaction. It puts real stakes your end of the bargain. Depending on your loan terms, you would put about 5% of the total purchase price down at this point.
Now you and your lender are working hand in hand to get your mortgage approved. You'll be asked to provide financial documents like pay stubs, tax returns and bank account info. Your lender will hire an appraiser to determine the value of the property. They need to make sure the home is worth the money they plan on giving you. Get through the appraisal, and you're really cooking!
About two weeks before the scheduled closing date, your lender will provide you the mortgage commitment. This is important as it's one of the last defenses to your deposit. If the bank can't give you the loan, then you are entitled to all of your deposit money back. If that deadline passes, and the deal falls through, you could lose that money.
Three to seven days before closing you will get a closing disclosure. This is the money breakdown from the lender to you so you understand where your money is being allocated. Closing costs (taxes, initial escrows, lender and attorneys fees, document recording fees, etc.) are factored in here as well. There should be no surprises when it comes to your purchase. There are laws that protect you from this. If you don't have this disclosure at least three days prior, you can't close.
Closing day is upon us now! You will do a final walk through of the property to make sure it is in the same condition it was when you started plus whatever repairs have been done and minus the seller's belongings*. Once you're satisfied, you'll head to your attorney's office, or the registry of deeds, and sign lots of papers. Make sure to bring your valid license or ID! At this time you'll also hand over the remaining monies owed from your down payment and closing costs.
Within the next few hours, the property will officially go on record and you will be a brand new home owner!
Welcome home!
*it is surprising how often sellers think they have a window of time after closing to finish moving their belongings out of the home. Once the property is on record, you are the new home owner. The seller needs to have the home empty before the walk through. Failure to do so can lead to unnecessary delays in the closing process. A good Realtor® will help ensure that smooth transfer of ownership.
Until next time...
Dave
