How Does the Home Buying and Escrow Process Work?

Are you buying a house for the first time? If so, you might be wondering what you can expect to happen during the home buying and escrow process.

Here is a brief outline from a real estate agent in Alpine, TX about how that entire process works.

Step 1: Disclosures, inspections and credits

The very first step after the buyer and seller agree to a contract is to go through the disclosures and inspections.

The buyer will make a deposit of earnest money with the seller’s brokerage, an escrow agent or an attorney, depending on the terms of the contract. The buyer then reviews and signs any disclosures involved with the contract. These disclosures vary based on the type of property, but will include items such as known flaws with the property, necessary repairs or improvements and potential environmental hazards on the property. All of these disclosures will factor into the contract price.

Next, the buyer must arrange for inspections on the property in accordance with the terms of the contract. This is important for the buyer—the inspection could reveal hidden flaws about the property that make it unappealing or unsafe, and if that is the case, the buyer will be able to back out of the deal without having to forfeit their earnest money.

After inspections, the buyer can either ask the seller for repair work, ask for repair costs to be worked into closing cost credits or ask for a reduction of the price of sale to cover the cost of the repairs.

Step 2: Mortgage

The mortgage process is usually the most stressful part for new property buyers. It’s important to begin it as early as possible to give the lender plenty of time to complete the paperwork. Be ready to produce lots of documentation, including various bank statements, loan information, tax returns, pay stubs, contact information of your employer, explanations of credit inquiries, explanations about large deposits or cash gifts that fall outside your regular income and any other matters that could be material to your financial situation.

After reviewing all of this information, your lender will make their approval decision, and if you’re approved you’ll receive a loan commitment letter that includes the lender’s statement of willingness to fund the mortgage, granted you meet certain conditions.

The lender will usually order the appraisal, and if it comes in below the purchase price, the lender can decline to approve your loan unless the seller is willing to change the purchase price, or you change your down payment amount. The lender will also submit a request for title commitment to a title company, while you are responsible for purchasing homeowner’s insurance coverage and any necessary hazard insurance coverage.

Step 3: Closing

The final part of the transaction is the closing. You’ll submit your final loan documents to the escrow agent, and will then attend the closing at the title company, or the office of an escrow agent or closing company. You’ll sign all the documents, pay the remaining money of your down payment and closing costs, receive the deed and keys and take possession of the property.

For more information about how these processes work, contact a real estate agent in Alpine, TX!