At this stage of the loan process, you may experience the stress of deadlines. Remember that you have chosen competent and capable people who are working for you to ensure that this will be a smooth process. If at any time you don’t feel 100% comfortable with anyone in the loan process, you should ask another party for consultation. Remember that you are spending a large amount of money and should feel completely comfortable with the entire process. Below is list of some of the things that will happen during this time period.
After all parties have agreed to the terms of the contract and the executed date is filled in, a copy of the contract and the earnest money must be delivered to the title company. The title company, a disinterested third party, must remain neutral throughout the transaction. They will carry out all the instructions of your contract and provide the title insurance. The address of the title company chosen will be on your contract, so you can communicate freely with them. Generally, your real estate agent will contact the title company for all key factors and they will review your final figures before closing. A good real estate agent can review the HUD-1 (closing statement) and make sure you have not been incorrectly charged.
You have the right to do inspections any time prior to closing. Most buyers choose to get the property inspected during the option period. In case there are problems found, the buyer can terminate the contract. The option period begins on the executed date of the contract.
If you feel there is a major item that must be addressed after the general inspection is done, you can:
- Terminate the contract within the option period.
- Propose a lower sales price.
- Request the seller do the named repairs.
- Split the cost of repairs with the seller.
If you are getting a loan, a wood destroying insect report may be required before closing. This report is filled out by a specially licensed inspector and is often done at the time of the general inspection to keep inspection costs down. If you order the general inspection with the termite inspection at the same time, you’ll most likely save yourself a trip charge. This inspection report states if there is a current infestation, there has been infestation, there are conducive conditions (areas that might attract), or the property has been treated. Please keep in mind that infestation in general is easily treatable.
The appraisal is required by the lender to insure the property’s market value and to certify the property meets required standards. Two important areas to focus on are the appraiser’s value and the lender-required repairs. Although the appraisal belongs to the lender, you typically pay the cost as required by the lender. Federal law entitles you to a copy of the appraisal.
After the underwriter has reviewed your file, they will approve and send it to the closing department. Loan approval is the full and final approval to get your property closed. Sometimes the loan approval is conditional and you must provide documented proof that either your previous home has closed or a receipt of a paid account. Either way, the loan approval moves you one step closer to owning your property. One major factor that lenders consider when approving your loan is your credit score. For additional information on credit scores, please see the Frequently Asked Questions section. This is also a good time for you to Compare Your Lender and see if you are getting the best deal.
All repairs are generally done after the loan approval. Sometimes a seller might agree to do them early, but don’t expect this until you have been completely approved for the loan. Repairs include lender-required repairs that must be done prior to the funding of the loan. Lender required repairs take precedence over all repairs, because the loan will not be approved unless they have been completed. Although the required repairs discussed are addressed in the contract, repairs that are needed after you are a homeowner should be a concern to you. Savvy real estate consultants should always recommend a residential contract to protect you in the coming year.
After repairs are done, it is always recommended to re-inspect the property. Often times, the general inspector you originally hired will look over the work for a nominal charge. This re-inspection trip should not be skipped. Allow yourself enough time before closing for the re-inspection of items where repairs had been requested.
Before closing you must obtain homeowners insurance. You will need to provide your insurance agent with the address, square footage, and age of the property. Some insurance companies ask for additional information that can be provided by your real estate agent. Your insurance will not go in effect until your loan has closed and funded. Your insurance premium will be included in your closing costs, so make sure you don’t pay for it up front.
The amount of your insurance premium is determined by the type of coverage needed:
- Replacement versus actual cash value of items in your house
- Replacement versus actual cash value of dwelling coverage
- Deductible amount
- Security system, deadbolts and smoke alarms
- Discounts may be given if you use the same insurer for your auto insurance
Please remember that flood and earthquake damage are not covered by a standard homeowner policy. You may need to buy a separate policy to cover those types of risks and is depended on the likelihood of occurrence in your area.
A survey will provide a graphic account of the property you are purchasing. It will show the structure fence line, boundary lines, encroachments, and easements of the property. The buyer customarily pays for the survey, but the cost can be negotiated if the property includes acreage.