Game plan for buying a house

What happens next?

Buying a house might seem scary, but the truth is there are experts who hold your hand all along the way. The only hard part for the buyer is to choose the house and apply for the mortgage. Other than that, most of the work is done by someone else on your behalf. Here are 14 common steps along the path to buying a home. In reality, you will probably skip several of them, and several others are just a phone call or fax. Don't be scared!

Get pre-qualified

Before you go house shopping, it’s a good idea to speak with a loan officer and see if you qualify for a mortgage. If you are planning to use the USDA Rural Development program to get 100 percent financing, I recommend Phil Davis at Mortgage Network in Elkton (www.phildavishomeloans.com) . He can check your credit and give you an answer over the phone.  There is no charge for this service.

Sign sales contract

Once Phil (or your chosen loan officer) says you should be able to qualify for the mortgage, we get together and sign a simple one-page contract . At this time you will need to write a check for an “earnest money” deposit, usually $500 which will be applied toward your purchase price or closing costs. The purpose of this is to show that you are “in earnest” and intend to go through with the deal. If for some reason you cannot get the mortgage after all, the money will be refunded to you. However, if you get cold feet and change your mind, the seller gets to keep the money.

Apply for loan

Even though you were pre-approved over the phone, you need to formally apply for your mortgage. This usually involves a meeting with the loan officer. He will tell you ahead of time what paperwork you need to bring to support your application, usually your last two pay stubs, last two checking account statements, and two years of income tax returns. You will probably need to give the loan officer a check to cover the appraisal fee, generally around $400.

Appraisal

The bank will arrange for an appraiser to meet with the seller to take a look at the house and make sure it’s worth the amount of money they are lending. You do not have to be present for this.

Commitment letter

Once the bank has all the necessary paperwork and the appraisal has been turned in, they will send you a formal letter of commitment, telling you that they will give you the mortgage. This can take 2 to 3 weeks from the time you apply. From this point on, most of the work is done by the experts and you just wait for the date of settlement.

Title search

Once you have the commitment letter, you need to send a copy of the sales contract to an attorney or title company and ask them to open a file. They will check to make sure the title is clear and they will handle all the paperwork from this point on.  Their fees are part of your closing costs; you don’t have to pay out-of-pocket.  (If you don’t have an attorney or title company, I can recommend one. Your lender may also have a suggestion.)

Home inspection

You might want to hire a home inspector to inspect the house for faults. You can ask friends or neighbors for a recommendation or find someone in the Yellow Pages. Your loan officer may be able to recommend someone. You do need to be present at the inspection, and generally the home inspector wants a check at the time of the inspection; cost is generally $350 to $400. (USDA does not require this. Their appraiser looks for any major problems and will call for additional inspections if required.)

Termite inspection

You may also need to hire someone to do a termite inspection. Some home inspection companies are certified to do both, or you might need to hire two different companies. Again, the loan officer can probably recommend someone. It’s generally a good idea to schedule all inspections for the same time period so you don’t have to make extra trips.

Well/septic inspection

If the property is out in the country you will need to have a licensed professional certify that the well and septic are functioning properly. Again, the home inspector may be able to perform this task. If you are on town water and sewer you skip this step.

Property survey

The bank will send someone out to survey the property. This is to protect you as well as the bank –  to make sure, for example, that a neighbor hasn’t put a shed or fence on your property. You don’t need to be present for this, and the fee will be part of your closing costs.

Take first-time homebuyer class

With some government loans, you will be required to take a first-time homebuyers class. This can be done in one or two sessions at several places on the Eastern Shore including Goldsboro and Salisbury. The class is also available online. The purpose is to make sure you understand everything about your mortgage and the responsibility of owning a home. (USDA does not require this.)

Get insurance

As the closing date approaches, you will need to get a homeowner’s insurance policy. Your loan officer and the title company will be able to advise you on this. You might be able to get a multiple-policy discount if you use the same insurance provider that you use for your vehicle.

Schedule utilities to be changed over

Call the electric company (Delmarva Power) to have the electric put in your name as of the date of closing. Schedule the phone company, cable, etc. if you want them to be hooked up the day you move; otherwise, this can wait until after closing.

Closing

Closing or “settlement” is when the buyer and seller sit down together with the attorney or title company representative and sign all the paperwork. With a good title company, this process is painless and each piece of paper will be explained to you before you sign. After closing you will walk away with the keys to the house and a copy of all your paperwork. The actual deed will be sent to the county courthouse to be filed, and you should get the original back in the mail within a couple of weeks.