Purchasing a home is one of the most exciting times in the lives of many Tennessee residents. However, homebuyers must go through several steps between finding a home they love and getting the keys. Several steps are involved in the closing process of any real estate transaction.
Preapproval
When shopping for real estate, there is a difference between getting preapproved for a loan and having a prequalification letter. Homebuyers who go through the pre-approval process often get through their closing much more quickly. This is because an underwriter preemptively checks certain facts and details before closing.
Loan underwriting
Before a homebuyer officially receives the funds necessary to purchase a home, a loan underwriter must review the details of the application. These include:
• The buyer’s employment status
• The buyer’s income
• The buyer’s credit history
• The buyer’s current assets
Home inspection
Most states allow homebuyers to waive their right to an official home inspection, but many experts agree that doing so is a bad idea. During an inspection, a licensed inspector checks the home’s systems including:
• Foundation
• Roof
• HVAC system
• Plumbing system
• Electrical system
If these inspections uncover any latent defects in the home, most purchase agreements include a provision for the buyer to back out of the deal. Even if you don’t want to get out of the transaction, issues uncovered in an inspection create some negotiating leverage for buyers.
Appraisal
There is a significant difference between a home inspection and an appraisal. During the appraisal process, a licensed appraiser evaluates the overall value of the home based on its condition, location and other market factors. Most mortgage lenders make the loan contingent on the home appraising for a value equal to or greater than the value of the loan.
The closing process is a lengthy one. However, each step is an important part of protecting the lender and the buyer.
