The Home Purchase Process
1. Work first with a lender to review your credit report and get pre-qualified for a loan. With this information you now know how much you can afford to spend and in some instances what type of a home you can purchase. Some homes may require cash only or will not finance except with a rehabilitation loan. Other homes may qualify for a VA or FHA purchase. Conforming loan limits have been increased as of 2018 to $453,100.
2. Work with your Realtor to find your perfect home.
3. Make an offer and negotiate with the seller the final sales price. Your offer includes your good faith earnest money which will be deposited with a title company shortly after your offer has been accepted. Your earnest money will be deducted from the total down payment due at closing.
4. Perform an inspection. An inspector will inspect the property for structural, electrical, plumbing, well, sewer, and radon issues, among others. The inspection is paid for by the purchaser and for their benefit. It is the cost of determining if this is the ‘right’ home for the buyer. The inspection is not required by the lender but I strongly recommend the buyer.
5. During the inspection period, the buyer can back out of the transaction and not lose their earnest money. The buyer can also back out during the inspection if they fail to come to terms with the seller over repairs to be completed or a renegotiation of price.
6. The next step in the process is the home appraisal. The home appraisal is paid for by the buyer and it's required by the lender to confirm the home is worth the amount the bank intends to lend to the buyer.
If the home does not appraise for the purchase price the buyer and seller can renegotiate. If they cannot come to terms or the buyer decides to back out of the transaction, the earnest money is returned in full to the buyer.
After this point in the process however, the buyer now has ‘skin in the game’. If the buyer backs out of the transaction they can lose their earnest money.
7. After the appraisal the buyer’s loan goes through the final underwriting process and any final conditions are determined and resolved. Once the conditions have been met the Closing Disclosures are sent out. The process called TRID requires creditors to give consumers three business days to review the Closing Disclosure and ask questions before the loan closes. At the completion of TRID the clear to close is issued and the sales documents are signed by all parties at the title company.
8. Funding/Recording happens after signing has been completed. Generally this happens within 24 hours of signing but can occur sooner. As soon as the funds have been wired to the respective parties the transaction is recorded with the county and the sale is closed. That means the keys can now change hands.