The ABCs of Home Buying

At times I forget. I forget that what is obvious and crystal clear to me isn’t necessarily clear at all to someone else. In fear of repeating myself I assume, and one should never assume, especially not in my profession. I should never assume anything and repeat everything, over and over again.

As much as every transaction is different there are also parts that are pretty much the same. Some go smoother than others, some transactions become borderline disastrous for reasons one is unable to control and it involves semi-frantic damage control. Most end up somewhere in the middle. Nevertheless, there are some similarities in every single transaction, the basic anatomy of it all. But what does purchasing a home look like? What happens during the process and what should you know?

I’m going to fast forward through the obvious. See, I did it again, assumed there are obvious parts in the process of purchasing a home… Slapping my fingers over the keyboard and rephrasing. I will concentrate more on the mystique of closing a transaction. What happens after you have found your dream home.

Choose a Lender and Find a Home

Before we get there, you have met with a lender or sometimes several lenders. Hopefully you listened to your broker and chose a local lender. Wait you need to have a broker? Yes, you need a broker.  Even more so, you need to have a broker that you work well with. Remember, you’re the client so it’s your choice whether you want to work with the broker you ran into or know from the hood or is a friend or a friend of a friend… your choice. But back to the story. You work with a broker that has given you information on lenders and you have met with a lender. You know what you can afford, and you have been pre-approved to buy a home. Not prequalified but pre-approved. Prequalified means you have told the lender how much money you make, and they tell you they would be likely to give you money for your home purchase. Pre-approval is more. It means you have submitted your paystubs and account statements and the bank actually knows your financial situation and they tell you how much they would be willing to borrow, meaning you have a loan.

So, you have a broker and a loan, and you have looked for homes and found the one you really, really, really want, want, want. You have discussed potential terms with your lovely broker, they have drafted an offer and gone over the nitty gritty with you. Yes, you should understand what you are asking for and promising before you sign anything, especially if you’re a first timer make sure your broker goes over the entire offer with you. It will take a while as most offers range between 30 and 60 pages, so grab a coffee and make yourself comfortable. Ask a lot of questions and make sure you understand what everything means.

You sign the offer and then you sit and wait and bite your nails. You’re all back in high school waiting to see if he will call… It’s nerve wrecking. You keep making sure your phone is working… why isn’t it ringing yet… it must be broken. And. Then. Boom. It rings: “Hi, this is your broker here, congratulations, you have just purchased a home!”

But what happens next tends to be the area that no one knows about. You have just entered the closing period.

"I might have to divide this post into two as I can already see it becoming my first book instead of a blog post. We’ll see…"

Your Offer Got Approved. Now What? 

You have purchased a home and the ball starts rolling. The ball with a gazillion timelines. Timelines that you have just signed and promised to comply with. Timelines that are brutally vital to abide by unless you want to put your earnest money at risk. Usually you don’t, as it tends to be quite a bit of money. So, listen to your broker and your lender and escrow and jump through the hoops.

As soon as the contract has been signed by all parties it will be delivered by your broker to escrow and your lender. Your broker should also send you a copy with the closing timeline. A timeline giving you information on what happens next. You will be bombarded by emails from your bank, escrow and your broker. Your life will be crazy for a couple of days as you’ll be filling out escrow questionnaires, loan applications, choosing inspectors, having inspections, delivering earnest money and more. Yikes. Sounds scary, doesn’t it. During these few days of craziness you’re also likely to hit buyer’s remorse, the moment where it all seems crazy and you deeply regret what you have just done. It’s okay. Everyone goes through that. Call, text or email your broker. You can almost consider your broker to be your mom during this period. Do not panic. Call your broker. Your broker will help you through these feelings.

"I really have to divide this post… There’s already 836 words and we’ve barely started."

Okay, back to business and the anatomy of buying your home. Now you are under contract and you’re dealing with buyer’s remorse combined with requests from right and left. Didn’t you already apply for a home loan? Why do you need to apply again? You apply again because now you have information on the home you want your lender to lend money against. Yes, the lender has wetted you and your finances but now they want to know what they are lending against. They will order and appraisal, meaning your lender will send a professional to go and take a look at your dream home to see what they think it’s worth. Most times the appraisal comes back at value, meaning your lender agrees with the price you promised to pay. A low appraisal gets a bit more complicated as the lender is thinking you paid too much but as we are dealing with the scenario where everything goes as planned and I would be more the happy to answer any questions you may have separately. The appraisal will happen behind the scenes and the only thing you need to know is that it is happening.

When your broker tells you, you have 2 days to get the Earnest Money sorted out, it really means you have 2 days. You do not have 3 days or 2 and a half days. The Earnest Money needs to be delivered in 2 days. It can be a wired or most commonly it will be a cashier check you hand over to your broker who will then make sure it goes where it is supposed to go. What you really need to remember is the 2 days. 2 days. This is important. 

In the next episode: inspection, 3-day waiting period and more.