Buying a home is probably one of the biggest investments of your life. These are some of the steps in the process:
- Negotiating the contract
- Applying for the mortgage
- Resolving inspection issues
- Utilizing the lender’s appraisal
- Completing the lender’s requirements
- Preparing for Closing
- Closing Disclosure
- Attending the closing
Negotiating the Contract
If you are working with a realtor, the listing realtor provides the Seller’s “Disclosure Statement” and drafts a contract for the parties to sign. Realtor contracts provide a three day period for your attorney to review and amend the contract on your behalf. This gives your attorney time to address your concerns. The form of contract favors the Seller in many respects and it is important for your attorney to add certain clauses to protect your interests.
If you are purchasing a home without a realtor, the Seller’s attorney generally prepares a draft of the contract and you must have your own counsel review and amend this contract before your sign.
Please remember that the closing date on the contract is an “on or about” date, and it may shift a few days due to the lender’s delays or the Seller’s inability to keep that exact date for one reason or another. Missing the date shown on the contract by a few days does not constitute a breach of contract.
Applying for the Mortgage
One of your most important tasks during this process is to apply for a mortgage. The Seller may request a “Pre-Qualification” letter at the outset which demonstrates that your lender has done a very preliminary review of your situation and believes, without receiving any back-up documentation or proof, that you appear to qualify for a mortgage. After that, the lender must perform a far more rigorous examination of your income, assets, employment and debt obligations and once complete, the lender will issue a “commitment” which assures the Sellers that you will indeed qualify for a mortgage. You must watch the dates on the contract very closely because if you are denied a mortgage within the allotted time period, you may withdraw from the contract with impunity and get your full deposit back. However, if you miss the deadline, it may be far more difficult for your attorney to receive your deposit back.
You must promptly comply with all the lender’s requirements and keep copies of everything you send. You must also continue to provide the most recent paystubs or gift information as the process moves forward.
Resolving Inspection Issues
One of the common expressions used in this area of the law is “Caveat Emptor” which means “Buyer Beware.” Regardless of the information in the “Seller’s Disclosure” about the home and the protestations of your realtor, it is up to you to pay for an inspection from a reputable company soon after signing the contract. The inspection may find problems with the home that you overlooked during your brief visits while talking about purchasing the house. It is most important to know about structural problems, high radon levels, termites, well and septic issues, water infiltration, asbestos or other hazardous substances, stucco defects, wood rot and roof problems. Our attorneys have “seen it all” and will help negotiate a successful resolution of repair problems on your behalf.
Utilizing the Lender’s Appraisal
The “mortgage crisis of 2008” was partly precipitated by appraisals magically inflating to the contract price, no matter how unreasonable. Now, appraisers conform to stricter standards and if they believe your home is not worth the price you offered to the Seller, they will say so. As a result, the lender may not offer you a mortgage as large as you would like. Our attorneys always incorporate language in the addendum to protect your interests in this regard. It may require the Seller to reduce the contract price based on the appraiser’s finding.
Completing the Lender’s Requirements
The lender and title company work together with you to prepare for closing. For example, the lender usually requires a survey of the property which our office arranges for you. We also submit the lender’s information, Deed, Buyer and Seller information to a title company for their review in order to provide you with the title insurance which the lender requires.
You must also obtain homeowner’s insurance on the new home and prepay for the first year. The lender will require a copy of the receipt several days before closing.
Due to increasing regulations, lenders continue to make seemingly unreasonable demands which frustrate Buyers. Nevertheless you must remain in touch with the lender and provide whatever they need so you will be deemed qualified and ready for closing. We will help whenever we can.
Preparing for Closing
In addition to satisfying all the ongoing requirements of the lender, you need to prepare for closing in certain ways. For example, you must be prepared to provide a bank check or wire for the title company on the day of closing in the amount of the remaining cash due on the contract plus the closing costs (approximately 3-4% of the contract price). Remember that funds tied up in stocks or mutual funds are not sufficiently liquid to generate a bank check and please note that a credit union will not be able to generate a satisfactory bank check.
In the afternoon before the day of closing, or in the morning thereof, the lender, title company and our office will advise you concerning the amount you will need to bring in the form of a bank check or wire for the closing. You will also conduct a final “walk through” of the house on the morning of closing at a time when your realtor advises you that the Seller has completed their “move out” and cleaned the premises. You must notify our office immediately if you find damage that has occurred since your home inspection, and our office will discuss the matter with the opposing attorney to work out the problem. These last-minute problems are always resolved prior to closing.
One of the new regulations placed upon the lenders is to provide you with a disclosure at least three days prior to closing to advise you of the lender’s costs, the interest rate and the bottom line you will need for closing. This protects your interests by allowing you to compare the final figure with the lender’s initial estimate and question any untoward charges in sufficient time to compel the lender, if necessary, to retain the same figure as originally promised. Many times our office discovers indiscretions, mistakes and errors on the documents and can step in to represent your interests vis-à-vis the lender.
Attending the Closing
Our office prides itself on resolving issues with the Seller, lender and title compay on your behalf prior to closing. As a result, the closing table is generally a pleasant time where documents are signed, keys are exchanged and conversation ensues. You will receive a copy of all your documents as well as the Closing Disclosure Statement, ALTA and certain Sellers’ documents.