What can I expect during the home purchase process?
From finding a suitable home to sealing the deal at closing, here's a brief timeline of the entire homebuying process and what you can expect at each stage.
Step 1: Find the Home You Want
This is often the longest part of the homebuying process. Aspects like market conditions and the features you want in a home will influence how long it takes to find a suitable home. You may get lucky and find an ideal home within a week, or you may search for several months before finding the one that meets your needs.
Step 2: Make an Offer
It finally happened, you found the home you love, and you want to make it yours. After viewing the home, let your real estate agent know that you’d like to make an offer. They’ll help you draw up the appropriate documentation, which will serve as a blueprint for the final terms of the sale. Your offer should include details like:
- How much you’re offering for the home
- When your offer will expire
- How much earnest money you’ll put down
- Who will pay for surveys, inspections, and other sale and closing costs
- When you’d like to close
- Contingencies and provisions
A real estate agent can often draw up and submit your formal offer the same day you decide to make it, which can make all the difference in a competitive market. Without a real estate agent, you may spend days creating the contract and ensuring it abides by all state and local requirements before you can submit it. The longer it takes for your offer to be submitted, the higher the risk that the seller will accept another offer before you’re able to throw your hat in the ring.
Step 3: Seller Accepts or Counters
The next step is less fun: waiting for a response from the seller. Sellers need time to consider offer terms, and if they have multiple offers to review, it could take some time. Typically, they’ll respond within 48 hours, but they have until the deadline stipulated in your offer. When the seller does respond, they may:
- Reject your offer
- Accept it as is
- Make a counteroffer
Step 4: Appraisal and Inspection
With your offer accepted, your lender will want to schedule an appraisal of the home to make sure the purchase price reflects the home’s real and current value. An appraiser will assess the value of the home using methods like comparative market analysis (CMA). If the home appraises for less than the agreed-upon price, you may not be able to secure financing for the full purchase price. In that case, the seller can agree to reduce the purchase price, or you may have to cover the difference, or walk away from the sale entirely. This is an uncommon occurrence, but it’s one that you should be aware of. The cost of a home appraisal averages about $300 to $600. When the lender orders the home appraisal, the buyer pays for it. You’ll also want to schedule a home inspection to make sure there are no significant issues with the structure. This should be done by a licensed home inspector and will typically cost between $200 and $400. The inspector will check all major features of the house, including:
- Exterior: Roofing, siding, crawl space/foundation, gutters, porch, etc.
- Interior: Flooring, walls, attic space, cosmetic damages, appliances, water and light fixtures, etc.
- Systems: Electrical, plumbing, heating, cooling, ventilation, drainage, etc.
Once you’ve chosen an inspector, your real estate agent can coordinate with them and the seller to schedule the inspection. Itmay take a week or more for the inspector to have time to evaluate the home, and it generally takes a few more days to receive the report of their findings. If the inspector finds concerns, you may request the seller make repairs, renegotiate the home’s sale price or coverage of closing costs, or choose to walk away from the purchase altogether.
Step 5: Title and Escrow
When it comes to homebuying, “title” is used to describe who has the legal rights to a piece of property. To verify that the seller has the undisputed legal right to sell the property—and that the property isn’t tangled up in financial or legal concerns—your agent or lender will order a title inspection. Property liens, unpaid taxes, or names of people on the deed who aren’t part of the transaction all present title concerns. When discovered by title inspection, these issues will need to be resolved by the seller before you can close on the home. Your agent or lender will also require the purchase of title insurance, which helps cover legal costs if additional title issues or ownership disputes arise. Another function the title company may serve is the handling of the escrow account. The escrow account will hold all funds that will be exchanged by the parties during the transaction, including your earnest money deposit, the seller’s deed, and other paperwork. The escrow account should always be managed by a third party. If the title company isn’t responsible for it, then a lawyer or settlement company may manage the escrow account instead.
Step 6: Underwriting
As soon as your offer is accepted, your lender will begin the underwriting process. This involves a meticulous review of all financial and personal information you’ve provided so your lender can finalize your mortgage approval and begin drafting the official loan documents. Your lender is likely to request additional documentation or information to help move things along. They may also send you revised loan estimates if details uncovered during this process affect your financing terms or amounts. If you have a complex financial situation – like numerous recent employers or non-employment sources of income (like alimony) – underwriting may take longer than usual. When the process is complete and everything’s in order, your lender will send you a “clear to close” notice, which means your financing is finalized and approved – and you’re ready to close!
Step 7: Closing
A few days before closing, you should perform your final walk-through to make sure the home is as expected – complete with finished repairs and any items you requested the seller leave behind. You’ll also receive a closing disclosure from your lender that outlines the final terms of your mortgage, including your monthly payment and the amount you’ll need at closing. Go through this document thoroughly and ask your lender any questions you have. With everything in order, it’s finally time for the big day! Closing should only take a few hours. You’ll go to your closing appointment and sign a mound of paperwork. Your real estate agent, loan officer, and a representative from the title company should be present to walk you through each document and answer your questions. Once you’ve signed all the paperwork, your lender will disburse the funds to the home seller, and your loan will officially begin. You’ll receive the keys to your new home (as well as copies of everything you signed) and walk out an official homeowner!
Make your dream home a reality with Isabella Bank
We offer a selection of mortgage loan programs at competitive rates to purchase, refinance, or build the home you've always wanted. With a variety of term options and expert mortgage lenders, we are here every step of the way to set yourself up for success.
