The Home Purchase Process for Buyers
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Pre-approval
See a lender before you look at homes. This is the single most important step in the home-buying process. With pre-approval status, you'll be able to seriously look at homes and be ready to make a legitimate offer. You'll feel confident knowing what to expect financially and that your offer will be treated seriously.
You should expect to bring documentation of your income and assets to your loan application. These items are typically copies of W2 statements for the last two years, 30 days of pay stubs, and all of your bank, credit union, 401(k), IRA and stock accounts. In some cases you'll need to bring your federal tax returns for the past two years (for self-employed, or commissioned borrowers, or borrowers with large bonus income).
Pre-Approval Letter
This is a letter that is issued to your real estate agent and is kept on file for the homebuyer.You will need this when you decide to make an offer on a home.
Purchase
Once you have selected a property, a purchase agreement is written. Your real estate agent will present the offer with your pre-approval letter and earnest money check. (which is treated as part of the down payment).
Home inspection
Once you've made an offer and the seller has accepted your purchase agreement, you may wish to have a home inspection. More and more people are electing to have a private home inspector inspect the home that they're buying. In fact, a common way to purchase a home is to make the purchase agreement's final acceptance contingent upon the results of a private home inspection.
Locking into an interest rate
Upon completion of an accepted home inspection, you are ready to lock into an interest rate. Locking into an interest rate protects your rate from market fluctuations until closing. By locking the rate, this creates a contractual agreement with your lender.
Appraisal
The lender orders the appraisal shortly after the buyer and seller accept the purchase agreement. The lender typically requires the homebuyer to pay for the appraisal at this time.
Title insurance
The lender orders the title work and the title company creates a title insurance policy for the lender and/or buyer.
Hazard insurance
At least two weeks before closing, the homebuyer needs to make arrangements with his/her own insurance company to purchase a hazard insurance policy. This is done easily by calling the insurance provider with the "loss payee" information provided in the information folder furnished by the lender at the initial loan application. (If the property is part of an association, the home may already have a hazard insurance policy paid by the association.)
Final approval
After receipt of appraisal and title work, the lender submits the complete file to the Underwriting Department for final approval. At this time, any additional items that had been requested should have been turned into your lender.
Upon final approval, the lender provides the homebuyer with the final figures and upcoming closing final checklist.
The loan "closing package" is created and is sent by courier to the title insurance/closing company.
Final walk-through
The homebuyers take a walk-through of the property to assure them that the property is in substantially the same condition as when they wrote the purchase agreement. This is generally done one or two days before closing.
Closing
The homebuyer and seller meet at the buyer's title insurance company. This is where the deed is transferred, final loan application is signed and checks are disbursed. The buyer typically takes possession of the property at this time or 24 to 48 hours after closing, depending on the terms of the purchase agreement.
