Purchasing or selling a home can be a confusing process. This guide will help you understand what happens each step of the way.
The buyers have fully completed the pre-approval process. Their documents have been in the hands of underwriting for a few days, and they have given them the green light. After dutifully searching for the perfect home, they have finally found just the one. Their real estate agent has presented the offer, negotiations have concluded and they have a contract.
Upon receipt of the executed contract, the lender sets the wheels in motion. They collect all the paperwork generally required by the underwriter and send out the upfront disclosures. The numbers sent out are preliminary and may change throughout the process.
Once the lender receives the disclosures and Intent to Proceed, they will move forward with the loan process. Notification of loan application is passed to the listing agent, who keeps the seller informed as the process progresses.
When they have all the buyers’ paperwork, upfront disclosures and title report, they will send the file to underwriting. This process usually takes 2 to 3 days while the underwriter verifies all the paperwork to the proper loan guidelines. If the underwriter has any questions, or requests additional paperwork, they will need help to collect this as soon as possible.
It is always important to remember that there are two components of every mortgage application that have to meet the approval standards. You, as the borrower, and the property itself must both meet underwriting guidelines. The home inspection is vital in detecting hidden issues with the home. It does not, however, go to underwriting. Best practice is to use the home inspection to make sure you’re getting the right deal on the home. If, for any reason, the seller is unwilling to negotiate or repair minor issues, the buyers need to determine with certainty if they will be moving forward. The buyers should also provide the inspection report to their loan officer so that they can be aware of any potential issues that might arise when the property is appraised.
As soon as the lender is notified that the buyer has an accepted inspection and they have the Intent to Proceed, the appraisal is ordered. Turn times for the appraisal may take up to 7 – 10 days, depending on the availability of the appraisers. With our current market conditions, it may take up to 10 days. Assuming both value and condition are good to go, the buyers will provide the appraisal report to their home owners insurance agent to finalize their quote. In the event the seller is required to make repairs, sellers should be careful to hire reputable repairmen and keep good records of completion and payments involved. Buyers will normally have the property re-inspected during the final walk thru to ensure satisfactory completion.
When the lender has the appraisal and any requested loan conditions, they resubmit the file for a final approval. This will take approximately 24 hours. They will also issue the Closing disclosure (CD) at this time.
Once they have a final approval, and the mandatory 3 day waiting period, the file is sent to their closing department for loan documents to be drawn. The closing process takes 24-48 hours. Please allow for an extra 3 to 4 days to close/fund if loan docs need to be mailed out of state.
Prior to closing, both buyers and sellers should arrange to have the utilities transferred from one to the other. To accomplish this task, a date (usually the possession date) will be agreed upon for the transfer. The sellers notify the utility companies to cancel their services on that day. The buyers make applications with the various utilities and ask that their services be established on that same day.
The closing can be held at the title company’s office, your lender’s office, or other agreed upon location, depending on the circumstances. The buyers will review and sign all their loan documents, provide evidence of required homeowners insurance and inspections (if applicable), and give a certified or cashier’s check to cover their down payment (if applicable), closing costs, prepaid interest, taxes and insurance. Their lender will then distribute the funds covering your home loan amount to the closing agent and they will arrange for exchange of keys and personal items.
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