Buying Basics – What To Expect

What to expect during your buying transaction.

There are several stages involved in buying a home. Keep in mind that individual situations vary, so it is always best to consult with your Loan Officer and Real Estate Agent, if you opt to use one, for details about your own unique circumstances.

The most common first step is to decide whether or not to use a Real Estate Agent to represent your needs. Of course, you don't have to contract with an agent, but it is a very helpful to have someone familiar with the process looking out for you.

Next, it is a very good idea to obtain pre-approval. It is important to note the difference between pre-qualification and pre-approval. During pre-qualification, your Loan Officer will make a determination as to the size of the loan you are likely to qualify for. This determination is based solely on the information you give them. No official search or documentation is made to verify the information given to the lender, so pre-qualification is not a guarantee.

Pre-approval is documented research into your credit worthiness, thereby allowing the Loan Officer to make a more concrete assessment of your loan qualifications. It is the next best thing to actual approval. This way, you can avoid possible heartbreak by falling in love with a house that you might not be able to qualify for.

Additionally, pre-approval gives you increased leverage during the buying process. For one thing, it shows the seller you are serious in your desire to buy a home. Also, if a buyer is fielding numerous offers, they are much more likely to accept someone who has been pre-approved even if the offer isn't the largest one on the table.

With the preliminary work done, it is time to find a home. If you have opted to be represented, your Real Estate Agent will provide help in this area. Once you have found an affordable property that meets your needs, discuss your offer with your Real Estate Agent if you have one. Draft a contract with your offer for presentation to the seller. This is usually followed by the negotiation process (the seller, of course, can accept, deny or negotiate your offer with you).

Ideally your offer is accepted at the close of the negotiation process. Your next step is to open escrow. (See next section, "Escrow") Your Loan Officer will assist you with this part of the process. You will prepare an "earnest money" deposit, usually 1% to 3% of the purchase price of the home. When you deposit this "earnest money" into escrow, a Preliminary Report will be ordered.

Once you have submitted your loan application, the contingency period begins. Have a physical inspection of the property done by a qualified inspector. Next, obtain all the necessary insurance you will need as a homeowner. Ensure that your coverage will be in effect at the close of escrow.

You and the seller will sign the necessary documentation. Once the Title Company receives the signed documents, you will provide a cashier's check or money order for the down payment. This should be done prior to the closing date. Once the down payment and closing costs are deposited into escrow, the lender will send the balance of the loan to the Title Company. Your Deed is recorded with the County Recorder's office. The only thing left to do is unpack!