Buying a home can be a very stressful and confusing time. Between all of the different terms and the many people involved it can leave your head spinning. Everyone involved in your transaction plays a very important role in either pushing your deal towards closing or helping protect your best interests. Here is a guide to help you know what is going on and who is involved every step of the way.
Your real estate transaction starts with your realtor. A good realtor will get an idea of what kinds of properties, in what area and what price range you are looking for. They will sift through the market inventory to get you the closest possible match and give you as much information on these properties as possible. Knowing what you want and what you are approved for are not always the same thing. Before you look at a single property your realtor will request that you talk to someone to see exactly what you are qualified for on your mortgage.
A pre-qualification letter can be done by your local bank, credit union or a mortgage broker. This process requires them to pull your credit and get an idea of what your income, assets and employment are. The higher the credit score and lower the debt to income ratio are the more likely you can get approved. A prequalification can be done over the phone or in person but keep in mind this is just the first step in obtaining your mortgage. Once your offer is accepted you will need to complete a full application and supply the lender with tax returns, bank statements and income information.
2. Make An Offer
Your Realtor will work with you on making an offer and getting it accepted. Once it is accepted it is a good idea to contact an attorney. The attorney’s role in the transaction is to review the contract and protect you every step of the way. They will also run a title search on the property you are buying to make sure there are no outstanding liens or anything irregular on the title. Once you have the title they will step out of the way until it is time for you to close.
The inspection is done on the property usually within a few days of your offer being accepted. This is done by someone of your choosing and for your protection. The inspection itself can be rather lengthy but the more thorough the inspection the better idea you will have of any issues with the property. Assuming there are no significant repairs or anything else wrong with the property you can then order your appraisal.
The appraisal is done by the bank as a way to justify the value they are lending on. Your lender will order the appraisal through an independent 3rd party who is not affiliated with the lender in any way. They will look at comparable sales and listings and determine a fair market value. Typically the appraisal value will be in line with the sales price but if not you can still proceed with the transaction but you will have to negotiate a lower price or bring the difference to the closing.
All this time you and your lender will work on getting final underwriter approval from the lender. They will review all of your income, assets, employment, title, insurance and any pertinent documents pertaining to this transaction. Depending on the loan product and the property this process can take anywhere from 30-60 days with the average being just over a month. Once you have final bank approval you are finally ready to close and move into your dream house.
The buying process can be a long and winding journey but if you take it one step at a time and enjoy the ride it will be much easier than you anticipate.