An “Offer to Purchase” is completed with a sales associate’s assistance, signed by the buyer and may be accompanied by a Due Diligence Fee and/or Earnest Money deposit. The amounts of these deposits are negotiable, and your agent can aid you in deciding how much to offer and what may be accepted by the Seller, depending on several factors including the price of the home, time of year, and length of time on the market.
Upon acceptance of the Offer to Purchase, the due diligence fee is given directly to the Seller and serves as a non-refundable deposit which allows the Buyer to examine the property closely. Some inspections your agent may suggest are: structural and termite inspections, survey and lot issues, well and septic (if applicable), homeowner’s association documents, and any other areas of concern. In some cases a structural inspection may raise issues that require a specialist such as a structural engineer or waterproofing expert. Your agent can guide you to reliable resources if this becomes necessary.
During the due diligence period, you will proceed with the loan process if you are financing the property. Be certain to act promptly to provide your lender with any requested documents as you will want to be certain that your financing is in place (and the appraisal completed) by the end of the due diligence period.
Prior to the end of the due diligence period, you may request that the Seller make repairs or adjustments to the sales price or closing costs. Generally, Buyers and Sellers come to agreement during this negotiation, but if that
is not the case, you may want to withdraw from the contract. The Seller retains the due diligence fee and the contract calls for the earnest money to be returned to the Buyer. Sometimes your agent may recommend that the earnest money be proffered after the due diligence period as you can withdraw prior to that time.
If you continue with the contract, both the due diligence fee and the earnest money become part of your down payment and are credited back to you at closing. If you change your mind after this time or fail to get financing, your earnest money is forfeited to the Seller to recompense him for the time off the market.
The Mortgage, Closing Attorney, and Insurance
In general, Buyers investigate mortgages, rates, and the lending climate prior to shopping for a home. Your agent can recommend reliable mortgage brokers and companies where you can compare rates and costs for loans which will fit your needs. The lender will interview you about your assets and income, as well as debts and liabilities, check your credit, and suggest loan programs to you. Since the due diligence period is of limited duration, many brokers will suggest getting pre-approved prior to making an offer. This reduces the chance of your being rejected for a loan later in the process and possibly forfeiting your earnest money.
Once you have identified the property you wish to purchase, the lender will arrange for an appraisal to confirm the value. You will choose an attorney early in the process in order to arrange the closing on the agreed-upon date,
have the attorney search the title
and possibly ordering a new survey. You also need to choose an insurance company so their agent can advise you regarding the availability and cost of yearly hazard insurance. All lenders require hazard insurance; in the case of townhomes and condominiums, the insurance may be included in the monthly HOA (homeowner’s association) fee.
Once both the buyer AND the property have been approved by the mortgage company (usually called being “underwritten”), the loan package is sent to your attorney to prepare for closing.
Prior to closing, the Buyer usually walks through the property to ascertain the condition of the house. If repairs have been made, either the Buyer or inspector can check the completion of the repairs as well. Generally, the Seller provides invoices of the work that has been done. At the closing (usually at the attorney’s office), the attorney goes over the loan documents and closing statement with you and your agent and the Seller and/or the Seller’s agent. Sellers do not always attend the closing as the documents required of them can be prepared in advance. These documents, including the deed and lien waiver, transfer the property to you. The closing is completed when these documents are recorded at the county courthouse. At that point, the property is yours and you may have the keys and take possession. The Sellers have turned off the utilities and you have turned them on in your name, so you are ready to move in! Congratulations!
A report obtained covering the borrower's credit history
$50 - $100 (paid at loan application)
A statement of property values made by an independent appraiser for buyer
$350 - $450 (paid at loan application)
Loan Origination Fee
A fee to cover the lender's processing of the loan. Paid by buyer
Varies. Usually 1% of loan amount
Buyer's one-time charge used to adjust the yield on the loan to market rate
Fee charged by the VA on all VA loans. Paid by the buyer
2.15% without down payment
Paid by the buyer at the time of inspection
$250 - $1,000 depending on size and age of structure
Paid by the buyer
$55 - $75
Paid by the buyer
$350 - $500
Normally the closing attorney is the buyer's attorney
$500 - $650
Paid by the buyer
$2 per $1,000 of coverage
Mortgage Insurance Premium
Typically required with loan-to-value ratios of 80% or more
Lender required – covering at least the amount of the mortgage. Paid by buyer
First year premium paid at closing
Interim interest paid by buyer from date of closing for balance of the month
Interest rate x loan amount divided by 365 = factor x # of days in month = interim interest
Buyer's funds held by lender for future taxes, hazard insurance and mortgage insurance
2 months hazard / 2 months mortgage / 5 months taxes (average)
Recording fees for deed, deed of trust and any and all documents. Buyer pays
$50 - $100 average