There are general six phases that a buyer should know relative to the purchase of a home. They are:

1) Get yourself a real estate agent

2) Get yourself a lender

3) Make an offer on a property

4) Get your offer accepted

5) Open escrow

6) Close escrow

The following is offered as a general explanation of each phase and a conceptual guide that will help you understand what is going on in each part of the complex process of buying a home.

1. Get yourself a real estate agent.

Tell the agent what you want to buy. The agent will ask you some questions regarding your current financial status, i.e. How long have you been in your current employment or self employment? What is your current gross monthly income? How much do you have for a down payment and closing costs? How is your credit? What kind of property would you like to purchase? Who all will own the property? You should answer all of the agent’s questions. These are "pre-qualifying" questions for the benefit of you and the agent, so that both of you can decide if you are ready, willing and able to buy what you say you want. You may be willing to buy, but if you are not able to buy, then you are not ready to buy. The agent will tell you what YOU need to do (not what the agent needs to do for you) to get yourself ready. For example, if you have credit problems, YOU have to go fix them.

2. Get yourself a lender.

If you and the agent determine that you are able, it is time to get a lender. The agent will suggest a few lenders based on the answers you gave above and the kind of property financing you need or want. All lenders do not have the same loan capabilities. You do not have to take the agent’s suggestions, you can chose your own lender. There are a few agents who do both real estate and mortgages. This can be a definite advantage to you because it will save your agent’s time in the transaction.

There are three phases to the loan process:

Pre-qualification

Pre-approval

Loan approval

Pre-qualification - The person you will work with first at the lender will be your "loan officer." The loan officer will complete a standard loan application. You will be asked the same questions the agent asked you above, plus some others that will provide much more detail about your financial, credit, and employment or self employment status. Upon completion of the application the loan officer may require (not always) approximately $55.00 to run your standard factual credit report, which is also called a tri-merge report. This kind of credit report gets information from the three major credit bureaus. If your credit is acceptable, the lender should give you a "pre-qualification," letter, which will state the amount of the loan you may qualify for. This is not the actual amount because at this point you do not have a property. A copy of this letter should be given to your real estate agent. At the time of application, the lender will also ask you to submit copies of, recent paycheck stubs, two years tax returns depending on the type of loan, 12 months bank statements depending on the type of loan, divorce papers if applicable. There may be other information but you will really move the process if you prepare this information in advance. Pre-qualification does not mean pre-approval or loan approval.

Pre-approval – The pre-approval is the process of verifying all of the information you supplied on the application, including verification of your money for down payment if any, and closing costs. After the loan officer takes your application, it will be given to a "loan processor," who will actually make phone calls, or send request for information or verification. They may even call you if further in formation is necessary. THE LOAN PROCESSOR IS NOT THE DECISION MAKER FOR YOUR LOAN. THEY WILL NOT DISCUSS INTEREST RATES OR LOAN AMOUNT. They simply need what they ask you for to help you get your loan. The Loan Processor puts the actual physical file together containing all the documentation you supplied, in the order required, and keeps a check list. When the checklist is complete and all the required documentation is in your file, it is then given to a "loan underwriter" who is the decision maker. If your file meets necessary requirements for the kind of loan your need, the Underwriter will pre-approve your loan based only on your income and credit.  Pre-approval is not loan approval because at this point you have not identified a property to buy. As a general rule, your loan officer will inform you that you are pre-approved but you will not get a pre-approval letter if you have been given a pre-qualification letter.

Loan approval – When you have gotten an offer accepted on a property that you want to buy, and that property is in escrow, the lender will send out an appraiser. The appraisal will be a fee from $350 to $450 or more depending on the kind of property. You will either pay the fee up front to the Loan Officer or directly to the Appraiser, or you will pay it later in your closing fees. Which way you pay or when you pay depends on the type of loan and lender. When the appraiser completes the appraisal, it will be given to the loan processor who will add it to your file and give it to the Loan Underwriter. The underwriter will decide how much of a loan to grant, i.e 80%, 90%, 100%, based on the appraised value. and on the monthly payment your income can handle. At this point, you will have loan approval.

3. Make an offer on a property

Make an offer on a property. The agent will write the offer, which is a sales contract called the Deposit Receipt. An offer requires a "good faith deposit." The deposit can be any amount, however, it should be an amount that sends a message to the seller that you are serious about buying the property. The larger the deposit, the better. Write a check for the deposit. The check should be payable to the broker or to an escrow company that might be used for the transaction. It is best to make the check payable to an escrow. The Deposit Receipt states that, " the check will be held un-cashed until after acceptance of the offer. Have the agent show you that clause. The agent will make a copy of the check which will be attached to the offer. . The seller will not get the actual check. If the offer is not accepted, the agent will return the check. The agent must give you a copy of the offer upon your signing the offer. If copies need to be made the agent should get that done immediately.

4. Get offer accepted

Once the offer is accepted, you and your agent should arrange for a property inspection immediately. This is your inspection, paid for by you.  The inspection is meant to give you an idea of the condition of the house. If the inspection reveals some major problems, you may want to renegotiate the terms of sale or cancel your offer.

5. Open Escrow

Escrow is what you might call the real estate transaction processor. Like the loan processor who puts all the necessary documentation together to do a loan, the Escrow Officer puts all the necessary documentation together to transfer property from seller to buyer. Escrow is opened by the seller’s or buyer’s agent by giving the escrow officer the signed accepted offer (deposit receipt) and the deposit check from the buyer. The escrow officer will review the deposit receipt and type escrow instructions. The escrow instructions contain all the agreements made between the seller and buyer and state all the actions and documentation required to make those agreement(s) happen for the successful transfer of the property. The seller, buyer, and agents all receive identical copies of the typed escrow instructions. The seller and buyer should review the instructions to make sure all the agreements are properly stated, sign the instructions, and return them to escrow. The escrow cannot officially proceed until buyer and seller have returned signed instructions to escrow.

Once escrow is open, you and/or your real estate agent should notify your loan officer. The loan officer will contact the escrow officer to get the escrow number and then order the appraisal.

There are a lot of things going on at this time. Your agent is getting disclosures from the seller, a termite report may be done, the seller notarizes the grant deed. Escrow has ordered the preliminary title report and demands and started the "HUD 1" which is a checklist/closing document that keeps track of all the expenses of the transaction (your agent will explain all this). You are getting your funds together and getting ready to move. However, you will note that any major work that the seller is supposed to do has not started yet. This is because everyone is waiting on loan approval. Loan approval cannot happen until the appraisal is in the hands of the underwriter. Loan approval means that you have the money, at which point the seller will do the major work agreed to. The Loan Officer will let you, your agent and escrow know when you have loan approval.

When the major work is near completion, your agent will have escrow call your lender and "order loan docs." In most cases, the loan docs will be sent to escrow. The escrow officer will then call you and schedule an appointment for you to come and sign the docs. After signing, escrow will send the docs back to the lender.

6. Closing Escrow

The docs are back to the lender, all the work has been done according to the deposit receipt and escrow instructions and escrow is ready to close. Your agent will call escrow and request that the officer "figure the file." This signals the escrow officer to determine the amount of the final closing costs. On completion the escrow officer will place a phone call to you. You will be given a dollar figure which you must bring to escrow in the form of a cashiers check. That amount will include three components: 1) the balance of the down payment, if any, 2) the closing costs, 3) a small cushion, usually a few hundred dollars. In one to three days your loan will "fund." The following morning, the deed will be recorded at 8:00 AM. About 100 PM the title company will give escrow a confirmation of that the deed has been successfully recorded. At that point you are then the proud owner of your home. The whole escrow process should not exceed 45 days in most case and can be sooner or later.

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