Looking to buy a home? One of the key challenges you’ll face is the paperwork. From your buyer representation agreement to the closing statement, there’s a mountain of important documents you must climb in order to secure your next home.
To help us avoid a paper-lanche, we reached out to Lisa Rome of Berkshire Hathaway HomeServices in Chicago! Lisa has been in the real estate industry for more than four years and helped us navigate through the important documents of the homebuying process.
Here’s a quick map of the home buying documents:
- Buyer representation agreement.
- Preapproval or proof of funds in place.
- Purchase agreement.
- Home inspection report.
- Attorney drafted letter.
- Appraisal.
- Mortgage documents.
- Title insurance.
- Homeowners insurance.
- Closing statement.
Buyer representation agreement
When starting the home buying process, you’ll need to find an experienced real estate agent who can help you every step of the way.
“Buyers, especially today, need to make sure they’re being represented properly,” says Lisa. “You really want somebody that’s going to go the extra mile for you, that’s going to understand the nuances of the market.”
You’ll start the document journey by signing a buyer representation agreement. This states your real estate agent will be your exclusive agent representation for the transaction.
Preapproval or proof of funds in place
The next step is for you to meet with a lender to get pre-approved for a mortgage. If you’re an all-cash buyer, then it’s best for you to get “proof of funds in place.”
“We want to make sure we have all our ducks in a row and we’re going to look at appropriately priced houses within their budget,” says Lisa. “That’s especially important in today’s market with how quickly things are moving.”
Purchase agreement
Once you and your real estate agent find your next home, it’s time to submit an offer to the seller.
“This is something that I do on their behalf,” says Lisa. “I walk my clients through the steps and terms of the Multiboard 7.0 Contract, which is the standard documentation for purchasing a residential property.”
This agreement shows what the sellers are offering for the purchase price and what the buyers are offering in “earnest money.” This is the money you’re willing to put down that shows your intent to buy the home.
The agreement also includes closing tax prorations, home warranty considerations, and more.
“I walk through the contract very carefully with [the buyers], and then it has to be presented to the sellers’ agent who then presents it to the sellers.”
Negotiations ensue, and once the buyers and sellers come to terms, the contract is signed off.
“Then you are considered to be ‘under contract’ on a house,” says Lisa. “You have a fully executed contract in place.”
From there, homebuyers go into an “attorney review” period, where both buyers and sellers have an attorney representing them, positioned to their agent. If you don’t have a real estate attorney, your real estate agent may be able to refer one.
“I have a few attorneys that I refer business to that I know work well, whether you’re a first-time home buyer, an experienced buyer, an investor, or buying new construction,” says Lisa.
Home inspection report and attorney drafted letter
During the attorney review, you have five business days from the executed contract to also conduct your home inspection. The home inspection is initiated by the buyers and is an out-of-pocket expense for them.
Explains Lisa, “The buyers have a right to an inspection, even if they’re purchasing a property as is, unless for some reason they’ve decided to waive that contingency.”
Usually, buyers receive the inspection results within 24 hours. Once received, the buyers, the buyers’ agent, and their attorney will discuss the findings.
“We go through any items that are deemed major health and safety issues,” says Lisa.
At this time, the home buyers, along with their attorney, will decide if they would like to ask for closing credit, additional specialists to survey the home, or the sellers to repair those items. The attorney then drafts a letter to the sellers that goes through the contract specifics and makes sure all the buyers’ requests are well represented.
This is another opportunity for the sellers to negotiate. Once both sides agree to terms, the buyers and the sellers sign off. Then, depending upon how the contract is written, you may be required to put up the remaining earnest money.
Formal approval of the loan
Once you emerge from the attorney’s review period, you then engage the lender or mortgage provider you’ve chosen for the formal approval of the loan. You typically have 45 days or five days prior to the close date, whichever comes first, to secure financing for your home.
You’ll need to provide the following important home documents when applying for a home loan:
- W-2 forms.
- Pay stubs from your employer.
- Income tax records from the last two or three years.
- Alimony or child support documents.
- Retirement and investment account information.
- Credit reports.
- Bank statements.
- Other documents, such as rental payments, student loans, and previous bankruptcy or foreclosure records.
This can be a lengthy process, but at the end, hopefully you’ll be approved and have your mortgage!
Appraisal
An appraisal is when a professional evaluates a home for its value, usually during the home selling process. The lender schedules the appraisal and generally has their own appraisers.
After the appraisal is completed, the homebuyer and agent will receive word if the home is appraised for the purchase price.
Closing documents
As the steps above are completed, the buyers’ and sellers’ attorneys work to get all the closing information in place, including the title insurance.
The title insurance essentially ensures that the owner legally owns the property and can sell the property without additional debts or payments that would need to be made by the new owner. It also protects the lender and ensures the owner can legally borrow money against the property.
Homeowners will also need to buy homeowners insurance during this time as they’ll need to show proof at the closing. Now is also the time to select a home warranty if the sellers will be providing the policy.
“If a home warranty is not written in the contract, but the buyers are interested in one, I can refer them to a few companies that we work closely with,” says Lisa.
After you get the clear to close from your lender, then you are just waiting for your close date.
The home closing process and statement
“At the close date, your lender will go through a list of all of the terms of closing,” says Lisa.
This means the check from the lender, your down payment, and a closing statement, which the lender sends prior to closing. This way, the buyers and sellers are aware of what they’re responsible for to complete the transaction.
“After that, you go to the closing and have a million pieces of papers to sign,” laughs Lisa.
Once you close, you’ll own your home. Congratulations and welcome to homeownership!
How long does the homebuying process take?
From contract to close, the entire process takes generally 60 to 90 days.
“If you want a longer timetable, that’s part of terms that can be negotiated,” says Lisa.
Depending upon the situation – a seller can’t vacate the property or the buyer is in a rental home with a long lease – a home buyer or seller may want to push the closing date.
Prepare to be competitive
This is especially important in today’s competitive real estate market where a few days or even a few hours can cost you a potential dream home.
“Because things are moving so fast, you want to have your best foot forward,” says Lisa.
This includes having your pre-approval letter, so in case you’re competing against another offer, you’ll look as good as you possibly can.
You also need to pick an experienced real estate agent.
“A lot of buyers that I work with are first-time home buyers,” says Lisa, “so they have no idea how the process works, who they need to call, what they need to do, and that’s something that I talk about from the beginning.”
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