The Home Buying Process: What happens after your offer is accepted and how do you get to the finish line?

QUALIFICATION TO PURCHASE

Please note that this is what the buyer can expect at time of writing. All conditions are subject to change. 

INTRODUCTION

The first thing a serious buyer should do when looking for a home is talk to a lender about pre-qualification since it will give them a sense of what they can afford. When the buyer is ready to purchase a home they will need to seek what is called 'pre-approval' which is a more detailed and thorough process, and involves such things as a credit check. Ultimately, without a pre-approval letter from the lender in an amount that covers an offer price, the would-be seller will not have the assurance they are looking for. In the DC metro area, a pre-approval letter is typically required when making an offer. 

1. Upon ratifying a contract to purchase a home, the buyer will need to make an official loan application as well as to provide any outstanding financial documents that may be requested. Once the interest rate is locked, the lender will order an appraisal (for a fee) for the subject property, as well as title work. 

    If the buyer/s included an inspection contingency as part of the contract they will need to conduct it within the time frame indicated as well as to shop for home insurance with an agent of their choice. All of these outcomes will be of interest to the lender and the buyer's ability to proceed. 

2. A loan underwriter will review the loan file, and pending those findings, they will issue a commitment to lend. Once the buyer receives this commitment, there is no further need for the contingency, assuming there was a financial contingency in place. The typical conditions that need to be met are but not limited to:

• Employment verification
• IRS transcripts
• Updated bank statements, and any documentation that is required for gifts or liquidation of assets. 
• Credit rating or any indication of new debt

While the buyer awaits the completion of the various tasks needed (title, appraisal, insurance etc), there are occasions when the lender may need additional information. The underwriter, for instance, will conduct an appraisal with the express purpose of qualifying the purchase price/loan amount. In the case of a property under-appraising, the buyer will need to come up with the cash to make up the difference. Similarly, the title company (typically chosen by the buyer) will need to insure that the title is free and clear/transferable. 

3. Final Loan Approval: the loan underwriter will have received and reviewed all the conditions. Keep in mind that changes in credit, employment etc can have a negative impact on the closing/outcome.

4. Closing disclosure. Once everything has been cleared for take off, the buyer will receive a list of closing costs from loan origination fees to title insurance, to agency compensation etc. A preliminary copy of the disclosure will be issued inside a minimum of 3 days prior to closing. 

The final figure for closing will reflect the downpayment and settlement costs payable by wire or cashiers check at closing. All buyers will need to vigilant of fraud and it is recommended that they contact the settlement company directly before wiring funds or responding to what could be a suspicious email.  

5. Closing: All documents, from the final closing disclosure to the final loan paperwork, will be reviewed and signed by the buyer at the settlement office. Always bring ID, and a checkbook just in case there's a mistake on the balance which, granted is rare but does happen. Once all the t's are signed and the i's are dotted, it's time to hand over the keys and to congratulate the buyer/s on a job well done. 

6. Transfer of loan servicing: This will take place 1 to 2 months after closing. The buyer should expect to receive a ‘goodbye letter’ from the loan originator as well as receive an introduction to a new servicer. A welcome letter will be sent from the new servicer with detailed contact information.

Thank you for reading and please feel free to like or share, and as always Happy Hunting!