Five Step Home Purchase Process

Congratulations on deciding to buy a new home! This experience should be an exciting, stress-free journey provided you are proactive in your approach by getting pre-approved first. We know that may sound suspect considering the source, but we are willing to bet your Realtor will back us up on this. Technology has given everyone the ability to find homes for sale in just a few short seconds. But it’s important to remember that you aren’t the only one looking for their next home. The fast pace set by the “instant access” these technological tools provide means that you need to be able to move just as quickly to get that home under contract. Getting pre-approved ahead of time, before you even start looking for your new home, means you will be able to make an offer the moment you find a home you love.

By getting a Certified Homebuyer Pre-approval letter from the Family Mortgage Team allows you to make that offer with 100% confidence that you are fully pre-approved for the loan amount you need to buy that home. Too often we hear about home purchases falling through due to insufficient effort by the lender during the application process. Don’t risk the heartbreak that comes with losing the perfect home for your family by leaving it to chance!

While you are getting your documentation together to become a “Certified Homebuyer”, we start working on figuring out the numbers for you. We talk with you about pertinent details such as payments that you are comfortable with, how much money you have to work with for a down payment, what type of property you are thinking of and overall what is important to you about this. What makes you nervous?

From there we carefully put together some estimates and loan comparisons to show you various options. Some companies just try to fit you in a loan that is convenient for them…they don’t even bother to show you options. There are always options and depending on your goals, one loan typically will become the clear winner after some discussion. Our goal is to get you to that place of confidence so when you go to look for a home, you know what price range you can look in and what the payment will be therefore you can make your offer without hesitation. Once we finalize the numbers for you, we like to get together and walk you through everything, if possible, in person. If not, we have technology available that allows us to present it all to you via audio clip. Then after you have had a chance to listen, we spend some time together on the phone to answer all your questions.

Now that you have a certified pre-approval you can trust, it’s time for the fun part…finding your new home! By now you probably have an idea about where and what type of home you want to live in, but the key to finding the perfect home for you is to work with an experienced Realtor. As we mentioned, you can find a vast number of homes for sale online, but licensed Realtors have access to an even greater number of listings you can’t find on your own, and more importantly, have a level of familiarity with the neighborhoods in your desired area to help you locate the perfect home for your needs. Among other things, they will advise you on school districts, commuting times, local taxes, upcoming real estate developments, homeowner’s associations fees, and market trends. They will also work closely with your lender to ensure they are looking for homes that are within your pre-approval range for financing and are able to communicate effectively with your lender for the next step in the home buying process. If you’re looking for a realtor, we are happy to recommend an experienced agent in your area.

Once you find a property, an appraisal and inspection will need to be completed, and we will also encourage you to shop for homeowner’s insurance at this time.

This is where your Realtor is really going to shine! They will apply their years of experience and familiarity with the area to help you craft an initial offer on the home you want to buy. This may surprise you, but it’s not just about the purchase price. Timeframe and dates also play a major part here. There’s not only the closing date to consider, but there’s also the due diligence period, financing contingency and the appraisal contingency. Improperly negotiated contract dates may put your earnest money deposit at risk…Speaking of deposits, there are a few questions you will want to consider upfront, such as: What is a reasonable deposit amount? When do you need to pay the deposit and to whom? If the seller requests to stay in the home for a week after closing how will your deposit be affected?

Often the negotiations are a compromise between your needs and the needs of the seller — who is likely going to be represented by a Realtor being paid to protect the best interest of their client — not your own. In some cases, the seller may have an emotional connection to the home and being able to appropriately “read the cards” can avoid a costly misstep of an opening offer far below the asking price, causing them to take offense. Conversely, presenting your offer with a hand-written letter from you explaining that their home is perfect for raising your new-born will likely resonate with a seller who raised their own children in that home- even if they have a higher priced offer. The value a Realtor can provide during the offer stage simply cannot be overstated and they will continue to communicate with your lender to ensure all of your needs, both financially and personally, are negotiated effectively and protected by the binding agreement resulting from your offer.

You have successfully located a home, and with your Realtor’s guidance, negotiated terms for a binding home purchase agreement. Typically, the expectation is to finalize the purchase within 30 days, but there are other deadlines to be mindful of as well.

The day you sign the contract you will begin the first of 3 phases:

1) Due Diligence Period (7-10 days) – This is when you will want to have the home inspected to evaluate its physical condition. You have until the end of the due diligence period to identify issues that concern you, and if necessary, renegotiate the terms of the contract with the seller.

2) Appraisal Contingency Period (up to 21 days) – Next, your lender will order an appraisal. The appraisal is required by the lender to determine if the market value of the home is equal to, or greater than, the price on the contract. Simply put, no lender will agree to loan you more money than the home is worth. You have until the end of the 2nd phase of the contract, the appraisal contingency period, for the appraisal to be completed and approved by your lender. 

3) Financing Contingency Period (up to 21 days) – The 3rd deadline is the financing contingency, and you have until the end of this phase for the lender to approve you for the loan. Hopefully you followed our advice back at Step 1 and were already fully pre-approved. If so, then this deadline is largely a formality and you shouldn’t have any cause for concern. If not, you will have to work with your lender to do so before this deadline. It’s worth noting that you will have already paid for both a home inspection and the appraisal by now, so it would be a bad time to discover it was all for nothing.

You’ve made it through the due diligence period, the appraisal contingency, and the financing contingency… what’s next? If you haven’t already finished packing, scheduling movers or a moving truck rental, disconnecting and setting up new utilities, and the various change of address tasks, then now is the time. A few days before closing your lender will have final numbers ready for you to review, including the amount of money you will need to wire to the closing attorney for the down payment and any closing costs due. Otherwise, all that’s left to do is meet with the closing attorney on closing day to sign the loan paperwork and get the keys to your new home! Congratulations!

Looking back at these 5 steps, you may be surprised to note that we spent the majority of our time discussing your Realtor’s role and very little discussing your lender. If you start by getting a real pre-approval, fully documented and underwritten by your lender, then that’s the way it should be! A good lender will spend the time and resources to fully pre-approve you upfront, free of charge. It’s the only logical way to begin your homebuying journey, guaranteed to both minimize your stress and strengthen your negotiating position when you find the right home. It’s also the only step that you can get out of the way up front, so take control and put the horse where it belongs….in front of the cart.