Buying a home is a complex process. If you’ve never purchased real estate, you probably don’t know what to expect. This is why it’s a very good idea to use a buyer agent — preferably a REALTOR® (yes, there is a difference!).
The transaction process step-by-step.
Offer Accepted! You did it! You found a home you love and you’ve reached an agreement with the seller. Once the Purchase and Sale (P&S) contract is signed and dated by both parties and both parties are made aware of this, the contract gets an effective date. This is the date that starts the clock on your EMD and inspection period deadlines.
Earnest Money If you have promised an earnest money deposit (EMD), you’ll need to get your check to the agency holding the EMD in their trust account by the deadline. By not doing so, you risk the contract being terminated by the seller.
Submit P&S to Lender If you’re financing this purchase with the help of a lender, it’s time to really get to work on your loan. As soon as there is a fully executed P&S, your agent will submit it to the bank or mortgage company and you’ll start checking off the conditions of your financing. Some lenders and loan programs won’t provide a pre-qualification or pre-approval; they’ll want to see a completed P&S before you can start the application process.
Inspection Period Once the contract has an effective date, the clock starts ticking on your inspection period. Also called an investigation period, this is one of the contingency clauses in a P&S contract. Your inspection period is the amount of time you and the seller agree you will have to conduct a variety of investigations of the property. It is absolutely recommended that you hire a trusted professional to inspect the premises. The resulting home inspection report is your property and you decide who is allowed access to the information.
Title & Closing Initiation It’s a good idea to reach out to a title/closing company as soon as possible so they can begin to research the property’s title. This allows time enough to find and address any possible clouds on the title. Most title companies will not charge you for title research until the transaction gets to the closing table.
Inspection Addenda If you found an issue with the home during your inspection period and a solution was negotiated, an addendum will be added to the contract. If the issue is serious enough to affect financing, there won’t be a clear-to-close until it is taken care of. Repairs should be completed before the appraiser comes so that they see the home in its best condition and they won’t need to come back to verify that a repair has been made, which costs you extra money.
Appraisal Your lender will order the appraisal for you. While an inspector looks at the structural integrity and safety of the home for you, an appraiser examines the home and compares it to recent sales in the area to verify its value for the bank. A federally-backed loan will need to pass certain safety guidelines. The appraisal report will come back to the lender. The appraiser will either find that there is sufficient value in the property to support the loan amount, or the price or structure of the financing will need to be renegotiated.
Clear to Close Once the appraisal has been conducted, all contingencies in the contract are completed, and conditions of financing are met, your lender will announce that the loan is “clear to close.” A closing date will be set, and you’ll be on your way to the closing table! TILA-RESPA consumer protection laws dictate that borrowers must receive closing disclosures a full three days before they are allowed to close on the loan. If you’re closing on a Friday, you’ll need to see these on Tuesday.
Closing Table 24 hours before closing, you’ll get a settlement statement with the final total for taxes, prorations, your down payment and loan origination fees, seller concessions, and title search costs. Review this carefully and make sure you ask your agent or title company if you question anything. At the closing table, the title agent will verify your identity with a picture ID. Your EMD will be brought from the trust and applied to your closing costs as a credit. You will bring a certified bank check for the amount due from you. It is always a good idea to bring an extra personal check with you to closing, in case there are any minor last minute adjustments. You will sign mortgage docs, your deed, and other legal documents. Finally, you’ll get the keys to your new home.
I created this graphic of the process to give my buyers an understanding of the timeline from contract to closing. Download it for free here: We’re Under Contract Now What?