Congratulations! You found the house you want to buy. You’ve negotiated a sales agreement – you have a signed offer. What next?
- You need to give the sales agreement to your lender. Your lender will create a property-specific loan application and forward the application and disclosures for you to sign. Once you have signed these documents you will have officially applied for your mortgage loan. Note that the sales agreement will specify that this step must occur within “X” number of days from the time an agreement is reached. Typically you are required to apply for the loan within 5 days of agreement but that # is negotiable.
- Arrange for the home inspection(s). You will need to arrange for the required and optional inspections. Your sales agreement has an area where you specify which inspections you have a right to do. Typically the only required inspection is a water quality test if there is well water (but a water quality test is not required by most loan programs). Most people do a general building inspection and a septic inspection if public sewer is not available. You may be required to provide copies of any invoices for any inspections done. Please do not pay for this in cash — if the seller is paying your closing costs you cannot be reimbursed for things paid for with cash. If the seller is paying your closing costs you may need to document that the payment for the home inspection came out of your checking/savings.
- Order the appraisal. You will be required to pay for the appraisal early in the process. The appraisal determines the value of the home (must equal or exceed the sales price) and whether the property complies with the minimum property standards for the type of mortgage you are taking. The appraiser meets the listing agent at the house and writes up a detailed report. You will receive a copy of the appraisal report. Occasionally an appraisal comes in below the sales price or comes back with required repairs. If this happens, your lender and REALTOR will help you identify the options!
- Submit all requested information. You may be asked to provide bank statements, paystubs, W2s and other information. You may be asked to explain and/or document large deposits, payroll deductions, things on your credit report and a hundred other possible things. Most people find this annoying. The reason the lender requires so much documentation is that the lender needs to defend its decision to give you a loan. Lenders are under extreme regulatory control following the housing crash of 2009. Work with your lender to get them everything they ask for and keep smiling. There will come a time when your loan is fully approved and you do not need to provide another stitch of information.
- Cleared to Close! In mortgage terms these are the three best words you can hear! It means we are at that point where the lender is fully satisfied with the documentation in the file. The closing can be scheduled! The lender must provide you with a preliminary Closing Disclosure which you must receive and acknowledge at least 3 days before closing.
- Consummate the Transaction! Finally it’s closing day. A third party vendor will be the closing agent. Before the closing date they will do a lot of behind the scene work to make sure title is clear and the current liens will be paid off, etc. The actual closing could be at the closing agent’s office, at the REALTOR’s office or any other mutually agreed upon place. The required parties are the Buyers, Sellers and the closing agent. Most often both REALTORs are present and your loan officer will check in to make sure everyone is happy!
- Move in! Of course there is more to moving than getting the keys. You will need to line up all of the appropriate utilities and services.
- Start making payments!! Typically the first payment is due on the first of the month starting after the first full month you have lived in the house. So if you close in January, your first payment would be due on March 1. Mortgage interest is paid in arrears meaning that the payment made on March 1 is paying for interest charges that accrued in the month of February.
- Enjoy your new home.