Obtain Mortgage Pre-Approval
Mortgage Pre-Approval is a commitment from a lending institution to provide you with a loan up to a specific amount of money when purchasing a home. Pre-qualification, however, is not a guarantee or commitment by a lending institution and is more of an estimate of what you may be able to qualify for. If you are serious and intend to purchase a home in the near future you want to obtain Pre-Approval before you begin shopping as this will allow you to make an immediate offer when you find the property you want. The majority of banks and mortgage lending institutions do not charge for pre-approval and a property Seller may not take you seriously unless you have a pre-approval or loan commitment letter from your lending institution. Begin this process by speaking with your bank, credit union or a licensed mortgage lender. Expect to provide documentation to potential lenders in order to receive Pre-Approval and prepare the following documents in advance (in both digital and hard copy format):
* Payroll stubs for past 2 months
* Tax returns for the past 2 years
* Personal financial statements
* Statement on all loans (autos, credit cards, etc)
* Bank account statements for past 2 months
* Retirement and/or investment account statements
For Sale by Owner Properties allow you to make direct contact with the Owner. The Owner will be able to answer questions you may have about the property and will have more detailed knowledge of the property, having lived in or owned the property. After you’ve spoken with the owner about the details, features, and history of the home you can either schedule a showing with the Owner or attend an open house (if they hold open houses).
Make an Offer to Purchase a Home
If you make an offer to purchase a home with a FSBO Seller and your offer is accepted you should sit down with the seller and make a list of terms for the sale of the home. This list of terms for the sale should include details such as sale price, earnest money you will deposit with the seller, items included or excluded in the sale, appliances included or excluded, contingencies for the sale such as repairs to be made by the seller or inspections the property must pass, and a date you would like to close by. While you can take your list of terms to either a Title Company or Attorney to draft your Purchase and Sale Agreement, having a Real Estate Attorney look over any documents related to your transaction before you sign anything offers added security and peace of mind.
Work with a Title Company or Real Estate Attorney
A Real Estate Attorney or Title Company, as agreed upon by both the Buyer and Seller, will be able to guide you along in the process and answer any questions you may have. The Attorney or Title Company will set up Escrow, arrange Title Insurance, schedule and manage Closing, and help set up inspections as required by your Lender.
The Seller of the home you are buying will likely require you to put down an Earnest Money deposit on the home. This deposit will go into Escrow, be applied towards the purchase price of the home, and may not be refundable if you back out of the transaction. The Earnest money deposit may be refundable if something negative is uncovered about the property during an inspection and both you and the Seller are not able to come to an agreement about fixing the issue before closing.
Escrow is basically a third-party managed account, of which the proceeds will be released to the Seller and the transaction will be completed (Closed) upon meeting specific conditions of the agreement (inspections, time frame for Closing, Title Insurance granted, Property Insurance obtained, Property Taxes current, no liens on property, financing completed by buyer and funded by lender, repairs made, etc). Title Insurance must be provided by the Seller by the time you close on the property and will be provided by a licensed Title Company.
Arrange Property Inspections
Your Title Company or Real Estate Attorney and your Mortgage Lender will be able to guide you on what inspections must be performed on the property to satisfy your Lender’s requirements. Property inspections are performed at the Buyer’s expense and you will likely be in charge of scheduling the inspections, which you will have to coordinate with the Seller. Keep in mind that the number and type of inspections required by your lender may be minimal and it may be a good idea to have professionals more closely inspect individual and expensive mechanical or structural systems of the property you are buying (Example: Septic Inspection, Foundation inspection, Roof System, Electrical Inspection, Radon Gas Inspection, Boiler Inspection, etc.).
Your closing will likely take a few hours and will involve you signing an enormous amount of paperwork. Be sure to get the keys and make sure you have arrangements in place to move in!
* All steps listed on this page are for general information only and are not meant to be a transaction-specific guide to complete your FSBO home purchase. All home sales may have unique or additional steps not outlined above. Seek the advice of your Title Company, Real Estate Attorney or Mortgage Lender on the necessary and specific steps for your transaction.