From Contract to the Closing Table: The Process of Purchasing a Home - Part 2
While you are taking care of inspections, your mortgage professional is going to continue working on the loan process. They will be asking for documents and verifying your employment. They will be putting together your file and making sure everything is in order for the underwriter. The underwriter is the person who gives final approval. Sometimes they will ask for additional documents so you might have to go through the underwriting process a few times.
They will also be working on approving the property. The biggest piece of this is the appraisal. They typically wait to order the appraisal until after the inspection is completed to verify that you will be moving forward with the purchase. You will be expected to pay for this upfront. Somewhere in the neighborhood of $750 unless the property is unusually large or unique. The appraisal is where an independent person is hired to asses the condition of the property and compare the price you are paying with the sales prices of similar homes in the area. The lender will usually require this to ensure that the home is worth what you are paying for it. They don't want to give you a million dollar loan on a $200,000 home.
As mentioned earlier, they will also asses the condition. They might recommend to the lender that specific repairs be made to the property. The lender will typicall make these repairs a condition to the loan. For instance, if there is significant foundation issues they will require the foundation to be repaired before closing. The requirements will vary based upon the type of loan. Government backed loans such as VA and FHA will be more stringent than a conventional loan.
Who Holds the Title?
While you work on the inspection and your mortgage professional works on your approval, the title company will be performing a title search. As discussed in our article about the title commitment, this is when the title company verifies ownership of the property and what liens there are. This also relates to your mortgage property approval. The lender wants to know that there aren't any defects with the title. They will also be checking into the property taxes, how much they are and if they are paid up.
Along with this comes the survey. The survey is a drawing of the property in relation to the property lines. The lender will want to know that the home, pool, patio, and fence are located within the property lines. Often times the seller will be able to provide a copy of the survey that they received when they bought the home. This can be accepted as long as the seller hasn't made any changes to the structure, added a pool, moved the fence, etc. If a new one needs to be ordered, it will typically take 2 weeks to get it.
Buying a Home in a Home Owners Association?
If the home is located in an HOA then you will be provided with a copy of the rules, covenants and financial statement. The seller will also provide you with a Resale Certificate. This document states if the seller is current on the HOA dues and if there are any violations and fines that need to be paid. It will state what you will be required to pay as long as you own the home. Once you receive these documents you have 3 days to review them and cancel the purchase if you determine they are unacceptable.
Moving Right Along
Once you get past the inspection and get everything turned over to your mortgage professional you have a bit of a waiting game. A lot of stuff is going on in the background such as the appraisal and the title search. This time can be difficult as you wait to take control of your new home but a little bit of patience will be rewarding.
As you get closer to closing there are few minor items that you need to take care of. One of these is getting homeowners insurance. Doesn't hurt to shop this around, but you will typically get the best rates by bundling this with your car insurance.
Before closing you also need to set up utilities. You may or may not need natural gas, but at a minimum you will need to set up city services (water/sewer/trash) and electric. In Texas you can typically choose your own electric provider unless you are in a co-op. To compare providers, you can go to Power to Choose. You can also use a service such as Utility Concierge to help you with all the utilities. One thing to note is that some cities (looking at you The Colony) won't allow you to set up water/sewer/trash until after closing.
If you want a home warranty you can place the order at this time to have it paid for at closing.
What is a CD?
As you get close to closing, your mortgage professional will provide you with a CD. This stands for Closing Disclosure. Part of the Dodd-Frank act, this government mandated form spells out all the closing costs along with what your monthly payment will be. They are required to have you sign receipt of this document at least 3 days before closing. If they don't get it to you in time, your closing will be delayed. Around this time you should also receive "Clear to Close". This means that the underwriter has given final approval to both you and the property. In the background they will then work on getting all the documents to the title company for closing.
The Final Walkthrough
Before closing it is highly recommended you perform a final walkthrough. While not required, this is important in ensuring the property is still in the same condition. There have been cases of homes being hit by tornadoes or burning down before closing. More commonly you are going to be looking for damage that happened during move out if the sellers have already done so. I have seen broken windows, holes in walls, or gouges in flooring from the movers. Best to inspect this so you can have any issues addressed before closing. This will usually take place the day before or the day of closing.
Hooray! It is Closing Day!
Closing will typically be scheduled a week ahead. Often you will go to the title company to close. Or you might have a remote closing and someone will come to the place of your choice to perform the closing. Either way, expect this to take about an hour. Buyer's closings are typically longer than seller's closings because buyers have the loan documents they have to sign. You will also need to take care of the down payment and closing costs. This might be done by wire or by cashier's check. Check with the title company because some of them have preferences for one over the other. When it comes to wires, be sure to check, double check and triple check the wire instructions. Wire fraud is rampant these days with many buyers losing their life savings by wiring it to the wrong person.
Where Are My Keys!
Now that you have closed, you still have to wait a little while longer before you get possession of the home. The transfer doesn't happen until closing and funding. So even though you are closed you have to wait for funding. This could take an hour or two or even a couple days. Funding occurs after both the buyers and the sellers have closed and the lender looks over everything to ensure all the i's are dotted and t's are crossed. Once they are satisfied they will give funding approval. If either party closes late in the day, this might not happen until the next day. If it is a Friday, you might have to wait until Monday to get the keys so be sure to plan accordingly. We typically try to get everyone to the close table by 2pm to improve the chances that it funds the same day. Once the lender has given the title company funding approval your REALTOR® will hand over your new keys and you can start moving in. We highly recommend changing the locks before doing so in order to have peace of mind that no one else has a key to your house.
You are now a homeowner. Hopefully this series of articles helped you to understand the home buying process and what to look out for. We highly recommend having an experienced REALTOR® to walk you through the process. If you are thinking of buying a home please contact us. We would love to assist you!