You met with your mortgage lender to make sure you would qualify for a mortgage loan and get an idea of how much you could afford. You met with your realtor and started looking at houses that were in your price range. You found the perfect house! What do you do next?
You and your realtor will begin drafting an offer to purchase that will be submitted to the sellers. Your realtor will work with you to determine how much you should offer to purchase the house for and to formulate your negotiation strategy. This is also a good time to let your mortgage lender know that you have found a house and you are submitting an offer. This update allows your mortgage lender to make sure your original prequalification letter has not expired and to reactivate your file if needed.
This also puts your mortgage lender on alert that you will be moving into the next stage of financing shortly.
After your realtor submits your offer to purchase to the seller, you will likely receive a counter offer to purchase. This counter offer is the sellers offer. Sometimes this is a quick process and other times it may take a while and go back and forth several times. Don’t worry, you are in the hands of an experienced realtor and they will help you through this process. During this process you will also make an earnest money or good faith deposit as a signal of intent to proceed with the transaction.
The earnest money will later be applied as a portion of your down payment.
The Purchase Agreement:
Once you, the buyer, and the seller come to an agreement on the purchase price and any other items to be included, your purchase agreement is finalized and becomes a binding contract between you and the seller. This is the legal document that will govern the details of transaction from required dates of inspections and loan approvals, to the date you will take possession of your new house and it will outline who is responsible for certain tasks and deadlines.
The fully executed purchase agreement is a very important part of the transaction. Once you have a fully executed purchase agreement, you should provide a copy to your mortgage lender. Your realtor will typically provide a copy of the purchase agreement to your chosen title and escrow company. Both your mortgage lender and the title company will now begin working on your file to make sure all the required deadlines are met.
After you have provided an executed purchase agreement to your mortgage lender, you will receive an estimate of closing costs and required down payment figures from your lender. Your mortgage lender must provide you with these estimates within 3 business days of receiving your purchase agreement.
That is why it is important to provide them with a copy of the purchase agreement as soon as you can. During the time that your mortgage lender is preparing your estimates your realtor will also be scheduling appointments for home inspections. Together, you and your realtor will decided what home inspections you should have done to ensure you are aware of the condition of the house you are buying.
You should also ask your mortgage lender if there are any required inspections for the loan program you have chosen.
After your home inspections have taken place, you will be notified of the results. Working with your realtor, you will decide if the home is acceptable as is or if you would like to renegotiate the purchase agreement to address any issues or deficiencies identified during the inspections.
After The Inspections:
What is the next step? After the inspections have taken place and the purchase agreement has been renegotiated, if necessary, it is time for your mortgage lender to start the financing process. Your mortgage lender typically waits for you, the buyer, to give permission to move forward after the inspections are taken care of. Once you give your lender permission to begin, things should start moving pretty quickly. The next inspection that will take place…the appraisal.
In our next edition: the real estate appraisal.
Sarah Hosford-Campbell is a mortgage loan office with Envoy Mortgage. Feel free to contact her to suggest home ownership topics or for assistance with your home financing needs. Hosford-Campbell can be reached at email@example.com.