We know you need all the help you can get when it comes to buying your first home, that’s why Legalty has put together a First-time Home Buyers Guide to help you get through the process with confidence and ease.
Remember, there may be standard real estate forms, but not all real estate transactions are standard. The team at Legalty can guide you through the paper-filled home buying process, protecting you, your family and your investments every step of the way.
First Things First: Consumer Notice Signing
Pennsylvania home buyers take note: Upon first contact with a real estate agent, you should receive a Consumer Notice. Even if you’re just starting to talk about buying, this document should be presented to you and signed. Consider it a protective shield from the state of Pennsylvania. It’s not a contract, but an acknowledgement that the information you are giving to (or receiving from) an agent is used appropriately. If you don’t receive this document before or during your first conversation with an agent, be sure to ask for it.
Buying Power: Tax Breaks and Mortgage Pre-Approval
Now is a good time to start familiarizing yourself with the first-time home buyers tax breaks. Educating yourself on how to save money where possible is a smart way to start the real estate transaction. Another way to get peace of mind and know your buying power is by securing a mortgage pre-approval. The pre-approval will let you know how much you can afford, and let everyone else know how serious you are about purchasing property. A mortgage loan pre-approval will strengthen your offer when you’ve found the home of your dreams and need to move on a bid quickly!
Out with the Old Good Faith Estimate and in with the New Loan Estimate and Closing Disclosure Forms
Prior to 2015, Pennsylvania law required a Good Faith Estimate (GFE) from mortgage loan lenders to help outline all costs associated with buying a home. After 2015, the GFE was replaced with two forms: the Loan Estimate Form (a detailed breakdown of your transaction costs at the beginning of the process) and a Closing Document Form (a summary of all final costs at closing). Again, it’s another way for Pennsylvania to ensure you are protected during the home buying process.
Buyers Need a Seller’s Property Disclosure
Found your forever home? Home buyers are required to review and sign the Seller’s Property Disclosure prior to submitting an offer. This document will tell you every dispute and defect that has gone on outside, within or between the walls of your new home. Consider this document well-rounded insight into your home’s defect history and vital information to help you formulate the best price for your offer.
Making an Offer: The Agreement of Sale
Ready to put in an offer? The Agreement of Sale is the official offer contract including elements such as the final purchase price, required home inspections and financial contingencies as well as the detailed terms and conditions surrounding the property sale. There is usually some back and forth in figuring out terms and considerations that best serve both the buyer and the seller, so steady yourself for periods of waiting and negotiations.
The Earnest Money Deposit and Escrow
Once the offer is accepted and signed, an initial deposit from the buyer or the Earnest Money Deposit is given to an escrow agent and they begin to organize the closing process. The deposit is seen as a good faith offer on the property until the final down payment comes through. If a seller has multiple offers, a larger deposit could serve as a negotiation tactic to stand out from the crowd. If all goes well in the closing process, the Earnest Money Deposit will go toward your final down payment on your home.
Reassurance with Title Insurance
For those taking out a mortgage loan, a title insurance policy is typically a requirement. Title insurance covers any past mishaps connected to the land, such as fraud, liens or mistakes in the public records. Pennsylvania has regulated title insurance rates, so do your homework and find out the going rate to ensure no unnecessary fees have been added by your title company.
The Mortgage Loan and Final Appraisal
Pre-approval is not the final approval on your mortgage loan. Once your offer is accepted, you’ll need to submit an updated application for your loan and attach a lot of paperwork. Months of bank statements, payroll stubs, credit reports, tax returns, supporting financial documentation and disclosures are often required for submission. Once the loan officer has the submitted application, they will submit it for an internal review. While your mortgage loan application is in review, an appraisal of your home is ordered to ensure the lender agrees that the house is worth the purchase price.
If you’re relying on a mortgage to finance your home, then you’ll need protection to cover your home or property while you’re still paying off that loan. Buyers will need proof of homeowner’s insurance and sometimes a full year’s payment in order to complete the closing process.
You’re Almost There: The Final Walk-Through Inspection
The final walk-through ensures your home or property meets all of the conditions outlined in your agreement of sale. A walk-through typically take place a day before (if not on) the day of closing. You want to make sure any necessary repairs have been completed, all fixtures are functioning and that the general condition of the house meets your requirements. If something comes up during the walk-through, contact your attorney immediately to work out any issues to prevent a delay in closing.
Settlement or the Closing
The closing includes a number of steps and forms to conclude the homebuying process. You’ll need to bring a government-issued ID and any final paperwork needed. By now, you would have wired funds to your title company in order to close on your home. You will review and sign the Closing Disclosure Form, which outlines the details around your mortgage, proof of title insurance and homeowner’s insurance, as well as a bunch of additional closing costs, including the appraisal fee, deed transfer fee and county recording fee. Buyers, sellers, their attorneys, title agent, realtors and mortgage loan officers are typically present at the closing.
You’ve made it! It’s time to celebrate and start thinking about new paint colors and furniture. We’re sure it was worth the wait and we’ll want to be the first to congratulate you when the keys are in your hands.
Legalty provides flat-fee and custom plans to provide support and security in any kind of real estate transaction. Got questions? Contact Legalty today to discuss.