First Time Home Buyer Series: 5 Key Timelines in the Home Buying Process

In the home buying process there are multiple key timelines to stay on top of to make sure that you get everything done on time. The 5 Key Timelines in the Home Buying Process described below will help position you to be successful and worry free in your first home purchase. The last thing that anyone wants is to find a house you love, put in an offer, have it accepted, and then have issues because you missed a deadline laid out in the purchase agreement.

5 Key Timelines in the Home Buying Process:

1. Loan Pre-Approval
2. Home Inspection
3. Loan Application Submission and Processing
4. Loan Appraisal and Underwriting
5. Closing

Let’s take a look at each (links provided above).

1. Loan Pre-Approval

What It Is:
A Pre-Approval is essentially a letter from a lender that states that they are willing to lend you a specified amount of money under certain terms (interest rate etc), subject to a property appraisal and other fine print.

Why It Matters:
This is a key starting point when you’re preparing to buy a home. It indicates to real estate agents and sellers that you are a real customer, and not just someone who will waste their time. The real estate agent will base the properties they show you on the amount you have been pre-approved for, so if you don’t want to spend up to your maximum limit, be sure to communicate the amount you’re comfortable with clearly up front.

Not Sure what you can Afford? Don’t just rely on online calculators.
Read my in-depth article on understanding how much of a home that you can afford here.

Process:
To make life easier, contact 1-2 local lenders (preferably whom you bank with and will be more familiar with the local real estate market), and request a home loan pre-approval.

They will ask for a set of documents that include (but are not limited to):
– employment verification (recent two pay checks/subs)
– prior two months bank account records
– prior two years tax records
– proof of current address

Time Required:
– Up to you for document preparation and contacting lenders
– After submission, give them 1-2 weeks to get back to you

2. Home Inspection

What It Is:
A home inspection is where you will get a (hopefully) certified and insured home inspector to thoroughly check the condition of the home that you are looking at purchasing. They will put together a report for you that clearly details all of the features of the property, and their condition.

Why It Matters:
This report is vital for you to know the condition of the home before committing to buying, and it provides a credible, independent assessment of the property in case any improvements need to be made.

When I purchased my first house, this report was highly useful to me as it contained a number of small, but important fixes that were needed. After negotiation, the seller agreed to get everything on the home inspection report fixed and pay for it. This took the burden of making sure the work got done within the home closing timeline off of me, and onto the seller. It also meant that my family moved into a fully functioning home that didn’t need any repairs from day one, which was a huge relief.

I had a professional home inspector with a solid reference that I trusted. Make sure that you select someone with a good reputation.

Process:
You can find reputable home inspectors by talking with local lenders, real estate agents or friends and family. The cost varies, but I believe our report cost around $350.

Tip:
Have 2-3 qualified home inspectors lined up in case schedules don’t align and you need to move quicker than they can accommodate.

Time Required:
– From inspection to report should take 1 week, 2 at the maximum
– Aligning schedules will be the challenge here, so be sure to give yourself enough time by checking in with the home inspectors’ schedules before or soon after you make your offer.
– The key constraint is that after you make an offer and it is accepted, you are now on a countdown clock until closing. The longer you need, the less attractive of a buyer you appear, but if you don’t give yourself enough time, it can damage your reputation and in a worst case scenario, mean the home goes to someone else. At a minimum, it is a large inconvenience.

3. Loan Application Submission & Processing

Time Required:
– Even if you go with the bank you received a pre-approval from, there are still multiple rounds of back and forth for various documentation and waivers, much if not all of which will be done online.
– Find out how much time the lender you’re planning on using is taking to process loans, it can range from around 25 to 45 days. This is crucial because you will base your home purchase closing date in the contract around the loan approval as it is the longest timeline.

More on the mortgage loan process from Bank of America here.

4. Loan Appraisal and Underwriting

What It Is:
Banks outsource the home appraisal (evaluation of home’s current market worth) to licensed home appraisers.

Why It Matters:
The bank will only lend money if the home is at least worth what the agreed purchase price is. Even if you agree to come up with more money, they still won’t lend on the home.

The bank will also only lend money after a home appraisal has been completed and reviewed. Another opportunity for delays during busy periods.

Process:
– You don’t have a role here, but you can talk with local appraisers (or your real estate agent) to find out how busy they are to make sure you have enough time scheduled out for closing.

Timeline Required:
– Depends on the market and time of year (check in as suggested above to have a realistic timeline)

5. Closing

What It Is:
Closing is the term in real estate for the completion of the transaction. It is where the buyer pays the deposit, the bank transfers the balance of the funds, and both parties sign ownership of the property over to the buyer.

Timeline Required:
– This is what you’ve been working up to, and so you want it to go smoothly and stress-free. That’s why all of the prior steps are essential in order for you to have a reasonable target for the closing date. It needs to be based on a realistic assessment of how long it will take, vs. a it “should” take approach.