Financing
Ideally, getting pre-approved for a mortgage loan before securing a property would be best. Contact a mortgage broker or banker to start the process. The pre-approval will give you an idea of how much house you can afford and the security of knowing the conditions of the loan upfront. Having your pre-approval letter could also give you a leg up on submitting offers since this will speed up the process.
If you were unable to secure financing prior to finding your property, fear not! You still have time to get your pre-approval letter. Once you have found your mortgage broker or banker, the process of getting your approval can take several days. Remember, sellers prefer to sell to buyers who are ready to buy today and might not want to wait.
Private money loans can close in as little as 48 hours, which can give you the opportunity to negotiate a substantial discount on the purchase price since it is basically the equivalent of paying cash.
Traditional loans typically close in about 30 days. Alternative documentation loans can take 45-60 days to close. So it is important to know how much time you will need to close before writing any offer.
When your pre-approval is ready, your mortgage broker will send it to your real estate agent and work alongside them throughout the buying process.
Real Estate Agent
Finding the right agent for you is crucial. You want somebody who is familiar with your neighborhood and has good qualifications. Avoid using the listing agent when buying a property. Even though this is ethical and legal, it doesn’t generally give you the best representation possible.
If you don’t already have a licensed real estate agent representing you, your mortgage broker or banker can recommend an experienced local professional to help you.
Make an Offer on a Property
Once you have selected the property you wish to purchase, your agent will prepare the offer for your signature. Your offer package should include lender pre-approval letter, proof of funds, credit report, and letter of intent.
Open Escrow
Once the seller has accepted your offer, an escrow account can be opened. You will need to wire your deposit to the escrow company, which is a neutral third party. The escrow agent will ensure that the contract is fulfilled before releasing the money to the seller and advising the listing agent to give keys to the buyer.
Appraising the Property
The lender will schedule the appraisal. Neither the buyer nor seller can select the appraiser. They will give their valuation based on other comparable properties in the market. If the appraisal comes in for less than the agreed upon purchase price, you might need to increase your down payment or ask the seller to accept a lower price. Based on the appraisal, all parties will know if the final price is fair based on market conditions.
Should You Get a Physical Inspection?
Yes! It is highly recommended to get a physical inspection for every property you purchase. This could affect your investment decision of whether to proceed with the purchase. Some of the suggested inspections include mold, fireplace, sewer system, geotechnical and pest control. If your inspector finds “material damage,” you will have the opportunity to renegotiate your offer or withdraw completely from purchasing the property, as long as you allowed for an inspection contingency in the purchase offer.
Prior to closing
You will be asked to sign multiple documents from the seller, lender and escrow agent. Sellers may ask you to sign off on any contingencies that were in the agreement, along with any disclosures about the property. If you are purchasing a property in a Home Owners Association (HOA), you will need to review the HOA documents as well.
The escrow agent will ask you to sign any documents that were specified in the purchase agreement or escrow instructions, including various disclosures about the property, neighborhood, and community. The escrow agent will usually help arrange the signing of the loan documents as well. The escrow agent will also ask that you wire any remaining funds needed into their account before closing.
Closing
Finally, the day comes when your transaction closes. The title company will record the documents at the courthouse and confirm that you are listed on the county records as the new property owner. Once confirmed, escrow funds will be released to the seller and you will receive the keys.
All in all, the process doesn’t have to be as complicated or complex as you might think. Before you know it, you will have closed on your property and the process will be complete.
