Navigating the Financing Process
The steps of the process are many and can be very complicated. From negotiating and earnest money to making an offer and closing, you’ll find be equipped with the tools necessary to navigating the financing process.
The financing process can take anywhere from 15 to 45 days, but typically runs 30 days. Your agent should be involved throughout the process to help it run smoothly. The basic timeline for what will happen along the way is as follows:
- You submit the completed 1003 application and any required supporting documentation to the lender.
- The lender orders an appraisal of the property, a credit report and begins verifying your employment and assets.
- The lender provides a good faith estimate of closing and related costs, plus initial Truth in Lending disclosures, which, by federal law, must be provided by your lender within three days of first pulling your credit report.
- The lender evaluates the application and your supporting documents, approves the loan and issues a letter of commitment.
- You sign the closing loan documents and the loan is funded.
- The lender sends its funds to escrow.
- All appropriate documents are recorded at the County Recorder’s Office, the seller is paid, and the title to the home is yours.
As a buyer, you’re in a strong bargaining position and will look particularly welcome to a seller if:
- You’re an all-cash buyer.
- You’re already pre-approved for a mortgage.
- You don’t have a present house that has to be sold before you can afford to buy.
In those circumstances, you may be able to negotiate some discount from the listed price. On the other hand, in a “hot” seller’s market, if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers. It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep these considerations in mind:
- Every month a vacant house remains unsold represents considerable extra expense for the seller.
- If the sellers are divorcing, they may just want out quickly.
- Estate sales often yield a bargain in return for a prompt deal.
Making the Offer
You’ve found the home you love and now it’s time for the agent to make the offer. You need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but all the terms and conditions of the purchase.
Realtors® usually have a variety of standard forms (including Residential Purchase Agreements) that are kept up to date with the changing laws. In addition, Realtors® cover the questions that need to be answered during the process. In many states, sellers must comply with certain disclosure laws, and your agent will ensure that this takes place.
After the offer is drawn up and signed, it will usually be presented to the seller by your Realtors®, by the seller’s Realtors® if that’s a different agent, or often by the two together. In a few areas, sales contracts can be drawn up by the parties’ lawyers.
What the Offer Contains
The purchase offer you submit will contain many different items, each serving as a “blueprint for the final sale.” These purchase offer items include such things as:
- Address and sometimes a legal description of the property.
- Sale price.
- Terms – for example, all cash or subject to your obtaining of a mortgage for a given amount.
- Seller’s promise to provide clear title (ownership).
- Target date for closing (the actual sale).
- Amount of earnest money deposit accompanying the offer, and how it’s to be returned to you if the offer is rejected, or kept as damages if you later back out for no good reason.
- Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller.
- Provisions about who will pay for title insurance, survey, termite inspections and the like.
- Type of deed to be given.
- Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses.
- A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing.
- A time limit (preferably short) after which the offer will expire.
- Contingencies, which are an extremely important matter and discussed in detail below.
This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A Realtor® or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. The two most common contingencies within a purchase offer are that the buyer is unable to obtain financing from the lending institution, and that the home inspector’s report is of an unsatisfactory nature. Both of these contingencies release the buyer from the contract.
The Seller’s Response to Your Offer
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers cannot later change their minds and hold you to it.
If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you will receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer.
You and the seller may counteroffer back and forth for as long as you wish. As one of you changes the purchase offer, the other will be free to accept, reject, or modify.
If you’ve never signed your name numerous times within a mere forty-five minutes, then you’ve never closed on a house. The settling of the transaction is a fairly brief process where all of the necessary paperwork is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. Deeds, loan papers and other documents are prepared, signed and filed with local property record offices.
Withdrawing an Offer
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven’t yet been notified of acceptance. You don’t want to lose your earnest money deposit, or find yourself being sued for damages the seller may have suffered by relying on your actions.
A home inspection is an evaluation of a home’s condition by a trained expert, and before purchasing a home, you want to ensure it is in good condition. The impartial inspector will evaluate the physical condition of the structure, construction, and mechanical systems. The inspector will also identify any repairs or replacements that need to take place. He or she will also estimate the remaining useful life of the major systems (such as electrical, plumbing, heating, air conditioning), equipment, structure and finishes.
After the inspection is complete, you will receive a written report of the findings from the home inspector, usually within five to seven days.