Complete Home Buying Guide From Inception to Closing Part 2
So, are you ready to buy a house? In Part 1, I briefly went over the steps of what happens once you’re ready to buy and I’ll expand more on it on this article.
The Action Stage
- Talk to a loan officer to get pre-approved for a loan
- Talk to me to start shopping for a home
- Go through a cycle of seeing a house, making an offer, and getting outbid in this market
- Your offer gets accepted!
- You deposit the earnest money
- The loan company asks you to send documents
- We do a home inspection
- We get the inspection report back and determine if we need to request the seller to make repairs
- The loan company orders an appraisal
- The loan company asks you to send more documents
- We do a final walkthrough to check the condition of the house, if repairs are done, etc.
- Send over the down payment and closing costs.
- Sign A LOT of paperwork
- We meet at your new home and I hand you the keys to your new house!
Get pre-approved for a loan.
Hopefully, you already talked to a loan officer about getting pre-qualified and you like them enough to keep working with them. Your loan officer will give you a list of documents that they need to approve your loan application but they usually want 2-3 months of these documents:
- Proof of income: W-2, 1099, tax returns, profit and loss statements
- Proof of asset: bank, investment, and retirement statement
- List of debts: credit cards, student loans, car loans, etc. and your monthly payments on them
- Misc: rent payments, child support, alimony, bankruptcy, gift letters
This looks like an intrusive list but it’s necessary for them to determine how much money they can lend you. Your income and debt payments are translated into Debt to Income Ratio and a lower ratio makes you a better loan candidate. Depending on how long it takes to get your offer accepted on a home, your loan officer will need new documents to make sure your financial situation hasn’t drastically changed. You’ll never know what’s going to happen but this is not a good time to buy a new car or change your job!
Let’s go shopping!
This is the easiest part of the process and one that most people are familiar with. We’ll go to open houses and schedule tours. We’ll reference your wants and needs list until we find you the perfect home.
Once we find a home you want to put an offer on, we’ll talk about strategies. We’ll discuss the price you want to offer, the earnest money, and the contingencies we want to include. The seller will either accept, reject, or counter our offer. If they counter our offer, we can choose to accept or reject their terms. Once an offer has been accepted by both you and the seller, we have mutual acceptance and we go into contract!
Being in contract
The purchase and sale agreement that we agreed on has a timeline that we need to follow. Not following the timeline means we broke the terms of the contract and put us into default which can entitle the seller to keep your earnest money. Typically, the Washington State contract states the following timeline:
- 2 days after mutual acceptance to deposit earnest money
- 3 days after mutual acceptance to deposit earnest money
- 10 days after mutual acceptance to perform an inspection
- 5 days to review the property title and any HOA documents after receiving it
- A specified closing date in the contract
There are a lot of moving parts and your calendar will look similar to below. Fortunately, it’s not your job to keep track of the timeline. My job (and the loan officer’s job) is to make sure everything is on track and the ship runs smoothly.
On the back end, the loan officer will order an appraisal of the house. When they get that back, they can finish the underwriting process and complete your loan. About 5 days before we close, we’ll go back to the house and do a final walkthrough. This is to ensure that the property is in the condition that we agreed on and that includes the seller doing any requested repairs, leaving or taking items in the house, cleaning the house before they leave, etc. If the condition of the house is satisfactory, we can go ahead and record the house. This means you go in and sign a bunch of paperwork (for the last time!) and the title company updates the records with the county. You also wire the rest of the down payment money.
Once everything goes through (should take about 1-2 business days) the key will be handed to you and the house will officially be yours! Congratulations!