Earnest Money Deposit

When a contract is accepted, an earnest money deposit (EMD) is usually required within three days. This shows the buyer's commitment to purchasing the home. If the buyer defaults on the contract, they risk losing the deposit. However, if the seller backs out without cause, they typically return the earnest money and may owe the buyer liquidated damages. It’s essential to understand your local laws and have your agent or attorney explain these clauses to ensure clarity.

Submitting a Loan Application

When submitting a loan application, you provide essential details like personal information, income documentation (pay stubs, tax returns), asset statements, and credit history. After gathering your financial profile, the lender will evaluate and present loan options. It's wise to obtain loan estimates from at least three lenders to compare rates, fees, and terms. This allows you to make an informed decision, ensuring you're getting the best deal for your mortgage. After submission, the lender will guide you through the underwriting process to move closer to approval.

Rate Lock: Interest rates fluctuate, and locking in a rate ensures you’ll get a specific rate for a set period, typically 30, 60, or 90 days. If rates drop after you've locked in, most lenders offer a one-time "float down" option to take advantage of the lower rate.

Underwriting: The underwriting process is when the lender evaluates your financial situation to determine if you qualify for a loan. During this stage, underwriters review documents such as your income, credit history, bank statements, tax returns, and assets. They may request additional information or clarifications to ensure your ability to repay the loan.

Due Diligence Period

This is the period during which buyers can conduct home inspections and negotiate repairs or back out of the deal without penalty. The due diligence period is set forth in the offer to purchase. It’s crucial to complete inspections and assessments before this deadline to safeguard your earnest money.

Appraisal

Your lender will hire an appraiser to determine the home’s value. If the appraisal comes in lower than the agreed price, negotiations may be necessary. If no agreement is reached, you can back out and recover your earnest money, depending on the contract terms.

Conditional Approval

After initial underwriting, you’ll receive conditional approval, which means the loan is approved if certain conditions are met. This could involve providing additional documentation or clarifying financial details.

Financing and Appraisal Deadlines

These deadlines protect buyers by allowing them to back out due to financing or appraisal issues. If the loan doesn’t meet approval criteria or the appraisal comes in low, you can exit the contract and reclaim any refundable earnest money, provided the deadlines are honored.

Clear to Close

Once the underwriter approves all conditions, you’ll receive the “clear to close,” meaning all documentation is in order and the lender has finalized the loan.

Final Closing Disclosure

Three days before closing, you’ll receive the Final Closing Disclosure, which details final loan terms and costs. Federal law requires this to be reviewed and signed before closing to ensure transparency.

Final Walk-Through

Within 48 hours of closing, you’ll typically do a final inspection of the property to ensure everything is as expected. If any issues have arisen, this is your chance to address them before signing.

Closing

This is when all parties sign the necessary documents, and ownership of the property is transferred. If you're out of state, a mobile notary will handle the paperwork. Once the deed is recorded, the home is officially yours.