Now that you have secured financing and agreed on a price for your new home, you might be wondering what else you need to do to complete the buying process. During this stage, the home is referred to as “under contract” or “in escrow.” These terms are often used interchangeably although they do mean slightly different things.
What Does “Under Contract” Mean?
Once a purchase agreement has been signed by both parties, the home is officially “under contract.” However, this does not mean that the sale is finalized. The seller will most likely continue to receive offers during this time, but they will not accept another offer while your contract is pending.
Your next step will be to begin the escrow process. This might seem confusing at first, but opening an escrow account and checking all the boxes can actually simplify the process of paying for your new home in future months. Once your purchase agreement is signed, you will move forward to begin the escrow process and set up your escrow account.
What Steps Do I Take While In Escrow?
The first thing you will need to do is schedule a home inspection and appraisal. The home inspection will uncover any issues with the home that need to be addressed before the sale is finalized. This includes structural issues, electrical issues, and any building code violations. A home inspection typically costs around $300, but the peace of mind it will bring you is invaluable.
Your appraisal will come next.
This is arranged by your mortgage lender and will be performed by a licensed home appraiser. This individual’s job is to determine a fair price for the property given the current market conditions and the value of the home. At a minimum, your mortgage lender will want to see the home appraised for the amount of the mortgage. In many cases, the appraisal will come in slightly higher than the value of the loan due to the size of your down payment and other factors.
Once your mortgage lender is confident that your home is worth the agreed upon sale price, you will begin the process of underwriting. During this stage, your lender will review your documents and contracts to make sure that you qualify for the loan. In many cases, you will receive final approval for the loan shortly after meeting with your lender.
In other cases, your loan might not be approved immediately. If you recently received pre-approval for a loan, this holdup is usually due to missing documents or changes in your credit score. If it is not cleared up quickly, this could mean that you are unable to purchase the home. If this is the case, your purchase agreement will be canceled and the home will go to the next highest bidder.
While a small percentage of homes loans are not approved for underwriting, this risk is the reason that many sellers choose to continue receiving offers even after the purchase agreement is signed. Having a solid offer on the back burner can make this stage less stressful for sellers.
Staying organized and making sure that you have all your paperwork in order is the key to a successful escrow process. To learn more about the steps you need to take before, during, and after escrow, call one of our agents today!
I wish you well and invite you to contact me if you have questions.
Please stay healthy and we hope to hear from you soon to discuss your property search and status.
Until Next Time!