What happens once you’re under contract?
Congratulations, your offer was accepted! Now what?
There are several things that need to happen at this point, and any one of them could be a blog post all on its own; here’s the quick version.
You’ll have a number of deadlines that were outlined in the purchase contract. Your agent will be keeping track of these, but you probably want to have a list of them for yourself as well.
Start your formal loan application. You already have the pre-qual letter, but that’s called PRE for a reason. You can’t get a lender to commit to the actual loan until they know specifically what property you they are lending on. Do be aware that you have no obligation to use the same lender that supplied the pre-qual letter for your loan, although I’m sure they would appreciate it. Lenders have different areas of specialty and you may be better served by going to someone else.
Schedule inspections. You’ll want to have a professional home inspector go through the property and give you a report on the current condition. They’ll alert you to issues both big and small, from a dying furnace to a missing outlet cover. It extremely rare for an inspector to not find any deficiencies, so don’t freak out if there are several. You’ll have an opportunity to send the seller an ‘inspection objection’ in which you can ask for these things to be fixed before closing, or you may be able to negotiate a price concession to cover the cost of dealing with it yourself after the sale.
In addition to your basic home inspection you should also get a sewer scope. This is, in effect, a colonoscopy for the sewer line. They stick a camera and a light in there and view the condition of the line all the way out to where it meets up with the city owned main sewer, which is usually under the street. This is important because you, as the homeowner, will be responsible for all that sewer line. If there is a problem it can be very expensive to fix, so it’s definitely something to check out before your inspection objection deadline.
You may also want to get a radon test, and if you have any inkling of suspicion that there may have been drug use on the property, get a meth test.
Your lender will order an appraisal of the property. An independent appraiser will look at the place and determine what they think the fair market value of the property is. If that value is equal to or above what your contract price is, then you’re fine. If it’s lower, you have a problem because your lender will only lend a percentage of the lower of the two values: the purchase price or the appraised value. If the appraisal is low, you can either renegotiate the price with the seller or make up the difference by paying more cash upfront.
You will also get a preliminary title commitment from the title insurance company. This lets you know whether there are any issues or questions about the current ownership of the property. You want to be sure that the people selling you the property actually own the property and there are no other claims to it!
You’ll need to arrange for homeowners insurance that will take effect the day you acquire the house.