From Looking to Closing and All the Steps In Between

For many, homeownership is a major milestone to accomplish during their lifetime. Having a roadmap to achieving this milestone can reduce the amount of time wanting a home and increase the the amount of time owning a home. But how do you make that first step from casually looking at websites like Zillow or Trulia and driving around noticing 'For Sale' signs to actually becoming a homeowner? It is a process that we have helped many homebuyers go through time and again and here we will lay out the major milestones and many considerations.

1) Casual Search

The casual search phase is an important starting point in everyone's home search journey. Seeing what is on the market, what size, location, and condition go for what price is important to build realistic expectations. In addition to searching you can get a rough estimate of what you can afford by getting prequalified for a loan. This is an input-only calculation that relies on your honest answers to provide an estimate of how much house you can afford and what size loan you may be able to qualify for. Because no one is verifying the information you are providing a prequalification is only a starting tool to point you in the right direction rather than a sure-thing. 

2) Serious Search

The serious search is broken up into two phases, first is the educational phase and the second is the offer-making phase. Starting to get more serious in your search means connecting with a Realtor® who can get you direct access to the multiple listings service (MLS). Your local MLS is the direct source of all homes coming to or currently on the market in your area. Websites like Zillow and Trulia are second-hand users of information that comes from the MLS and can take them 24 - 96 hours to update from it. This is why in a hot market by the time you see a house on Zillow it has already been snagged by someone else - someone who had direct access to the MLS and saw it before it was even on those websites.

Unless you have ample cash on hand you will also need to connect with a mortgage lender. A mortgage lender will be able to preapprove you for a loan and give you the sure-thing when it comes to knowing how much house you can afford. To preapprove you a mortgage lender will request financial information such as your current income (supported with documentation such as W-2s, tax returns, and recent pay stubs), assets, and other debts (and their monthly payment amounts). Mortgage lenders verify the information you provide them which is what gives weight to their preapproval. In the current market all offers that are being financed must be supported with a preapproval for that offer to be taken seriously.

     Educational Phase

The educational phase is making the first leap from looking at pictures online to seeing homes in person. What our buyers often remark is that the pictures can obscure defects or focus away from issues so that once they step inside the house they see everything "warts and all". It is also important during this phase to really consider how you want to live in your future home and what aspects are most important to you. If you have three kids then you may need four bedrooms; if you work from home you may need a dedicated office space; if you love to cook the size and condition of the kitchen may be more important than the size of the bedroom closets, etc. There is no substitute for actually getting inside a home and seeing it for yourself to truly understand what you want and need in a home.

     Offer-Making Phase

After seeing several homes in person you have started to form a good idea of what kind of home will suit you best. This is when you will feel confident when you walk into a home that, yes, this is the one. To make it your house you must make a formal offer, filling out a purchase agreement, and signing it saying these are the terms you are offering for the home. The most consequential terms are the offer price, downpayment/amount financed, type of financing, closing date, inspection contingency, and sale of buyer's property contingency. There are certainly other important terms but those above will often be what the seller is using to consider whether or not to accept your offer.

3) Under Contract

Good news! Your offer was accepted and the seller signed your purchase agreement. You are now under contract to buy the house! The next steps here are to clear any and all contingencies. Consider contingencies little questionmarks that need to be resolved prior to closing on the house. The most frequent contingencies we see are the inspection contingency and the financing contingency. The inspection contingency is a period of time that the buyer may elect into which allows them to have an inspector inspect the property for any issues that weren't disclosed by the sellers or generally noticeable when you saw the property. If issues do arise you have the ability to renegotiate with the seller to account for prior unknown deficiencies of the property. The renegotiation must be agreed to by both parties before the inspection period closes for it to be legally recognized. The financing contingency generally runs until close, however, the buyer generally has greater assurance that financing will not fall through the further along they go. The financing contingency may be tripped if the buyer no longer qualifies for a large enough loan to purchase the home. This can happen for any number of reasons but the most common are the buyer losing their job (source of income) or they finance another expensive piece of property (ex. a boat or a car) that raises their debt payments too high.

4) Clear to Close

This is when the mortgage lender has approved your file and assuming no major financial changes (i.e. loss of job or taking on a large debt) you will be able to close on the date specified in the purchase agreement. This usually occurs a week or a couple days prior to closing (depending on how long the period is between making your offer and closing). Around a week prior to close you will also want to start connecting with utility companies to schedule transfer of service into your name and provide payment information. This ensures a smooth transition for utility use and avoids potential disruption of utility service.

5) Closing

The day has arrived: closing day. Everything you have worked hard for is finally here. Here are some things to expect on closing day: 

* A qualified closer from the title company will walk you through each of the documents to sign, initial, and date.

* Expect the closing to last between 15 minutes and 45 minutes. If you are financing using down payment assistance it may be on the longer end. If you are paying cash you may be on the shorter end.

* Bring a cashiers check or schedule a wire transfer in the amount indicated by the lender that will be needed for the close.

* Bring your government-issued photo I.D.

* Don't expect to see the seller(s) at the closing table. Since COVID-19 the close process has been altered so that the seller(s) often sign their documents prior to close or at a separate location.

* Once you finish signing all the paperwork the keys will be handed over to you (unless the purchase agreement indicated a date of possession after the close). The home is now yours!