You got the house! Now what?
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your Realtor's advice) so that the due diligence and settlement process will go as smoothly as possible.
Unless you are paying cash, you will be asked for a down payment. You can choose to put down as much or as little as you want (depending on your mortgage,) but remember: the more you put down, the less time it will take you to pay off and the less your monthly mortgage payments will be.
During this stage of the home purchase, you are going to need an escrow or settlement company. The escrow company acts as an independent, neutral third party between you and the seller. The escrow team will tell you when and to whom to give your money in order to get the deed to your new home. It coordinates much of the activity that goes on "behind the scenes." A deposit (also known as earnest money,) in the form of a check, a wire, or a cashier's check is required as 'consideration.' It is needed to make a valid, enforceable contract between you and the seller. It may be held by the escrow company, an attorney, or in a broker's trust account.
The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not completed, you may be entitled to receive back all or a part of your earnest money. In certain instances the seller may be able to retain this money as liquidated damages. Prior to signing a purchase and sale agreement, it would be wise to speak with your attorney about all the terms you are asked to agree to in the contract between you and the seller.
The period that you are "in escrow" is often 30 days, but may be longer or shorter. During this time, each item specified in the contract should be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
1. Inspection contingency: the inspection should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results may mean that you will want to cancel the contract.
2. Financing contingency: Once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract, you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the contract.
3. A requirement that the seller must provide marketable title. Review the title report with an attorney or title officer. The title must be "clear" to ensure that you do not have legal issues regarding your ownership. Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.
4. Secure homeowner's insurance. This will probably be required before you can close the sale. Obtaining special coverage such as earthquake and flood insurance may require some time. It is in your best interest to apply for insurance as soon as possible after the contract is signed.
5. Contact local utility companies to schedule to have service turned on when you close escrow.
6. Schedule the final walk-through inspection. At this time, you should make sure that the property condition is as you and the seller agreed. For example, the seller may think that that "permanently attached" chandelier was her personal property.
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!
