If you’re preparing to buy a home, you may not consider the legal implications of the transaction. Purchasing a house is far more complex than making an offer, applying for a mortgage and closing the deal. Each of these stages requires several steps that can cause confusion and headaches. But by understanding the potential challenges, you can take a lot of the headache out of the process and purchase your next property from a position of strength.
Mortgaging your home
When you’re making an offer on a home, you will benefit from having a letter of preapproval from a mortgage lender. To receive this, you must provide the lender your personal information, credit history and income. The lender will then determine the amount you can borrow to purchase a home and the term of this payment. Once the seller accepts your offer, you must contact your mortgage lender again to begin the approval process. The lender will then verify your details, which could affect the rate and term of your mortgage. After your mortgage receives approval, you will sign documents legalizing the loan contract at a closing.
Negotiating the purchase price
You likely won’t pay the asking price on the home you buy. Instead, you will make an offer, generally through a real estate agent. The seller will either accept, reject or counter your offer, and you may continue negotiating until you achieve a compromise. Furthermore, you will have to put a deposit down on the home – called earnest money – that confirms your intent on purchasing it. If you back out of the deal, the seller may be able to keep the earnest money.
Dealing with inspection and title issues
One key issue you will want to address as part of the real estate contract is ample time to conduct your due diligence on the home. This will include, among other things, a thorough home inspection. This process establishes that the home has no problems beyond those the real estate agent or seller has disclosed. An inspection protects you in case any problems exist. You will also benefit from a title search. This process ensures the property has no liens or judgments on it that would prevent its sale. And you will also need to purchase title insurance for your home. This coverage protects your ownership from these liens and judgments, as well as any encroachment or deed issues that need resolving before your move. Take time to carefully review the closing documents. Common documents include a loan application, promissory note, trust deed /mortgage, rider, truth in lending(TIL), closing disclosure, settlement statement, IRS authorizations, deed, affidavits and disclosures.
Homebuying is a difficult endeavor that you don’t need to go through alone. Working with a real estate attorney can help clarify and ease the process.