5 Key Steps You Must Understand After Entering a Home Purchase Contract

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When buying a house in the United States, from the moment the offer is accepted and the purchase contract is signed, the last step of buying a house begins: the closing period . This stage usually takes about 30 days .

At this point, the buyer needs to complete procedures including paying a deposit, applying for a loan, buying home insurance, final home inspection, and signing the transfer . Only after these follow-up tasks are successfully completed can the buyer officially become the owner of the new home and move in.

Below, we list the main processes in chronological order:

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01 Pay the deposit to the Escrow company

According to the time agreed in the contract (usually 1 day), the buyer needs to pay the deposit (usually 3% of the house price) to the designated Escrow (third-party transfer escrow company) . The buyer can send a personal check to the Escrow company, or directly transfer the money to the bank.

After the house is pending, Escrow will send the buyer a Buyer Package form to collect various information. This form is used by Escrow to coordinate various situations and also prepare for property registration. Of course, Escrow charges for its services, and each county has clear regulations on whether the fees are paid by the buyer or the seller . For example, in Santa Clara in the Bay Area, the seller pays the Escrow fee; in Alameda and San Mateo, the buyer pays; and in Los Angeles and Orange County, the buyer and seller each pay 50%.

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02 Apply for loan and property valuation

Cooperate with the loan bank to submit relevant materials and lock the interest rate as soon as possible. After getting the completed house purchase contract, the buyer can quickly find several banks, compare mortgage interest rates , and select the one that suits him best, let them lock the loan interest rate (Lock Rate) and apply for the loan.

After paying the appraisal fee, the bank will determine a time to send a housing appraisal agency to appraise the house, and the appraisal report will be given to the buyer. It should be noted that the bank loan amount will be based on the lower amount of the appraisal amount and the transaction price. If the appraisal is lower than the transaction price (Low Appraisal), additional funds must be paid . At this time, the buyer and the buyer's agent need to coordinate with the other party to resolve the issue. If the buyer is unwilling to make the additional payment himself, and the seller is unwilling to lower the selling price, then the buyer can use the Appraisal Contingency to get back the deposit and exit the transaction.

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03 Buy home insurance

Usually, the loan bank will require the homeowner to purchase home insurance. If the house is in a flood zone or a wildfire zone, you may need to purchase additional special insurance. Common insurance companies include State Farm, Allstate, etc. When purchasing insurance, you also need to find several insurance companies to compare prices . Buyers can either purchase directly on the insurance company's website or find an insurance agent to purchase on their behalf.

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04 Home Inspection

In the Bay Area, home inspections are usually completed by sellers hiring third-party professional inspection companies and personnel , and a detailed inspection report with pictures and text is provided to buyers for review before making an offer. While waiting for the loan, if the buyer is not confident about the home inspection report provided by the seller at the time, he or she can also pay someone to do the inspection himself or herself, such as checking the roof, doors and windows, air conditioners, heating, water heaters, faucets, termite problems, etc., and the cost is about $800~$1000.

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05 Sign the transfer agreement and pay the down payment

After the buyer's loan is approved, the bank will mail the loan documents to Escrow. After verifying all the numbers with Escrow, Escrow will arrange for the seller and buyer to sign the closing documents related to the handover of property rights and the payment of the down payment under the witness of a notary public .

After the bank receives the signed loan documents sent back by the Escrow company, it will issue the loan. After Escrow receives the loan from the bank, it will generally go to the County to register the transfer of the property rights of the house on the same day. Once the transfer of the property rights is registered, it means that the transfer of the house is completed . About one month after the transfer of the house, the buyer will receive a transfer deed (Grant Deed, similar to a real estate certificate) sent by the County Clerk-Recorder.

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Once the transfer registration is completed, the transaction is complete! Congratulations to the buyer for buying the house he likes after careful selection! The buyer's agent will hand the key to the buyer. Remember to activate utility services such as water, electricity, and garbage in time!