Your Guide to Buying a Home on the North Shore
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The Home Buying Process
Purchasing a property is a multi-step process, and you will want a team of professionals by your side. Your team will likely consist of the following:
- A REALTOR® that is knowledgeable in your area to represent you as a buyer. You should not assume that all real estate licensees are REALTORS®. A salesperson or broker is only a REALTOR® if he or she is a member of the National Association of REALTORS®.
- A licensed mortgage broker or loan officer to provide mortgage pre-approval and to help guide you through the loan process. You may interact with several other individuals within the lending institution, such as the underwriter, processor, and closing department.
- An attorney to review contracts, conduct a title search, and oversee the closing. The attorney conducting the closing is the lender's attorney. Although you can hire your own attorney, in many cases you may not have to because your interests overlap with the lender. The seller may also have their own attorney.
Steps of a financed transaction:
It is often beneficial to have a buyer's presentation with the REALTOR® to learn more about the current market and the process. The first time you meet your REALTOR® in person you will need to sign a Massachusetts Mandatory Agency Disclosure.
A pre-approval requires a credit check and income verification. A pre-qualification does not require these steps; however, a pre-qualification is often not sufficient when it comes time to make an offer.
- Contact your REALTOR®
Work with you REALTOR® to schedule showings and visit open houses for the properties you are interested in.
- Make an offer
The offer (Contract to Purchase) is a legally enforceable contract in Massachusetts. This agreement can be closed on but is usually followed by a Purchase and Sale Agreement.
- Agree on Price and Terms
After the offer is submitted, there may be negotiation between you and the seller on both the purchase price and the terms of an offer. Your REALTOR® and the seller's agent will handle the formal negotiations.
The home inspection is a negotiable window of time for you to have licensed professionals inspect the home.
- Purchase and Sale Agreement is prepared and signed
This contract will guide the transaction to close. The attorney will review the Purchase and Sale (P&S) and offer edits as well as possibly attach a rider for additional protections. Any repairs or credits as a result of the inspection should be included. Note that the P&S agreement supersedes the offer so all agreements in the offer must be inserted into the P&S. At this point, your second deposit will be due.
- Mortgage Application is completed
Around the time of the Purchase and Sale agreement, your mortgage application is completed for the lender. A bulk of the financial work will be done now to get approved for the mortgage, an appraisal, insurance, etc.
- An appraisal is performed on the property
Your mortgage amount will be based on either the purchase price or appraisal amount, whichever is lower. If the appraisal is lower than the purchase price, you will have to bring additional cash to the closing to cover the difference. For example, if you are putting down 10% and the purchase price is $500,000 and the appraisal is $495,000 then the mortgage would be $445,500 (10% of $495,000). This means you would need an additional $4,500 at closing to meet the purchase price.
- A title searchis conducted by the attorney
A title search ensures there is a clear and salable title to the property. A typical title search goes back 50 years. If there are defects found, those need to be remedied before the closing can take place.
- Mortgage Commitment is given by the lender
This letter approves your home loan application. The mortgage commitment letter may contain conditions that are important to read and understand before your financing date passes.
- You receive a Clear to Close from the lender
This means the closing documents are ready to be prepared by the attorney, and a closing date can be set. Ideally, the Clear to Close happens prior to the financing date.
- The final walkthrough
This is performed within 48 hours prior to closing. The final walkthrough ensures there have been no unexpected damages to the property. It is not an additional opportunity to have a home inspection.
This is facilitated by the lender's attorney. Remember to bring your driver's license, passport, or Massachusetts Identification Card and a checkbook for any last-minute corrections.
Congratulations, you're a homeowner!