The home buying process has a lot of moving parts that affect each other. It’s important to understand everything so that you feel comfortable at all times and know how things can impact each other. The better you understand things, the smoother the process will be.
Firstly, you have Buyers (the people buying the home), Sellers (the people selling the home), Buyer’s Agents (The Realtor or person representing the buyer) Seller’s Agent (The Realtor or person representing the seller also commonly referred to as Listing Agent), Mortgage Loan Officer (the person doing the financing for the buyer), Title Office (the company that is handling the title work and closing on the property being bought), Appraiser (the person that evaluates the home’s value and completes a report for the bank and the buyer), and last but not least the Home Inspector (someone hired to inspect the condition of the home to be purchased). As you can see, there are 8 different parties involved in the home-buying transaction. These are the moving parts I was referring to. Each party plays a different role in the transaction and can have an impact on things.
The first thing that needs to happen in the home buying process, is the buyer (the person purchasing the home) must have their finances reviewed by a lender in order to receive a pre-qualification letter. After their finances have been reviewed, if acceptable, the Mortgage Loan Officer will issue a pre-qualification letter to the buyer. The buyer can give this to their realtor or representative that is helping them with the purchase to show that they have gone through the due diligence of having their finances reviewed by a lending institution.
The next step in the process is to search for homes that meet your criteria. You must stay within the price range that your lending institution pre-qualified you for so that everything remains eligible. If you find a home that you like, meet with your realtor or buyer’s agent and discuss the type of offer that you’d like to present to the seller. There are many strategies available on how to structure your home purchase offer and this is where having a qualified, reliable real estate agent is helpful. They will guide you through this and make sure your offer is respectable, in your best interest and most of all – possible.
After placing the offer with the sellers, you must wait to hear back from them. It can be several days before you hear anything. They will visit with their realtor or agent to discuss everything and how it affects them. Sometimes they will accept your offer outright, other times they will counteroffer with a change of terms and worst case scenario – they will reject your offer entirely. Whatever the sellers decide, it will impact your future negotiations so it’s important to work with an experienced agent that will guide you.
The day that you have a signed and accepted purchase agreement with the sellers, is considered day 1 to the lender. Lenders typically need anywhere from 20-40 days to complete a loan transaction with the majority of purchase agreements having a closing date set for 30 days out. There are many things that are going to take place simultaneously at this point in the process. As a borrower, you will need to get all of your remaining financial documents into the lender so that they can verify everything that they used to pre-qualify you. A lot of times, lenders only collect basic information up front and then will ask for the majority of the remaining items once your offer has been accepted. Also, you will need to decide on whether or not you are going to have a home inspection completed. These are optional and typically cost anywhere from $250-$500 so it is an added expense but it can bring to light any potential issues the house may have so that you don’t move forward with purchasing a bad home. You don’t have to do a home inspection but you are taking on more risk if you don’t. Aside from the optional home inspection, the bank will require you to get the home appraised. Appraisals typically cost anywhere from $300-$600. This is mandatory because the lender needs to make sure the house is worth what they will be lending you money for. If an appraisal comes in low, it can cause the entire transaction to fall apart. The appraisal is one of the largest variables involved in the home buying transaction. Lastly, title work will be ordered through a title agency of your choice. They will make sure the home has a clean title with no outstanding liens or judgments. This is important as you do not want to take ownership to a home where there are outstanding bills owed to others. All of these tasks are what takes place between day 1 and your closing date. A lot of things are happening behind the scenes that are out of your control so it’s up to your lender to update you on things as they come in.
The entire process has taken approximately 25 days and you’re ready to sign the paperwork to become an official homeowner. There is one last thing that must be done in order to get to the closing table. The lending institution must have you review and acknowledge your final numbers at least 3 days prior to your scheduled closing date. Once you’ve reviewed the final numbers and 3 business days have passed, you are now legally allowed to close on your home purchase. You will attend the closing with your realtor or agent, mortgage loan officer and title agency closer. After signing the closing paperwork, you are now an official homeowner and receive the keys to the home. CONGRATULATIONS!
At Minnwest Bank, we are here to help your dreams come to reality. Contact one of our trusted mortgage lenders today.