After your offer is accepted, the first step is usually to have an inspection.
Option period - After your offer is accepted and you’re officially under contract, the first step for you is usually to have a home inspection (while not a requirement, it is highly encouraged). That’s usually what the “option period” in the contract is used for. The standard TREC purchase contract has an option period section. A standard option period is usually 10 days, but it’s certainly not a concrete rule.
The option clause of the contract provides the right to the buyer to walk away for any reason during the designated option period (for a nominal fee paid to the seller). Most buyers will have their home inspection done during that period. That way, if the results show anything alarming, they have the right to walk away with no questions asked.
In Texas, the Texas Real Estate Commission does license home inspectors. It is an excellent idea to have a licensed professional inspector inspect your home before you proceed with the purchase. This will uncover most major issues with a home and give you a chance to address any repairs or corrections with the seller prior to proceeding with the loan.
Signing electronic disclosures - Once we receive a copy of the executed contract, we have three (3) days to send you your disclosure package. These disclosures will be sent to the email address(es) we have on file. The disclosure package contains information on the loan (including, among other documents, a copy of your Loan Estimate) along with various authorizations to process the loan. It is important e-sign and get this package back to us ASAP so we can begin processing the loan. Not acknowledging those documents on a timely basis could adversely affect your closing date, and no one wants that!
Ordering the appraisal - Once the option period is over, the next step is to order the appraisal. The lender must order the appraisal but it must be authorized by the borrower. Appraisals typically take 7 business days. The borrower is provided a copy when the appraisal in complete.
There are two parts to the appraisal. The appraiser will inspect the home to measure and take photos. Then the appraiser will complete the appraisal write-up offsite. As a rule, appraisers are supposed to use the 3 or more recent sales to justify the value.
The loan will be based on the lower of the sales price or the appraisal. For example: Let’s say a borrower is purchasing a home for $100,000 and is getting a Conventional mortgage with a 5% down payment requirement. If everything goes according to plan, the home will appraise at $100,000 or more. In this case, let’s say the appraisal comes back low at a value of $90,000. In that example, we could only loan 95% of the appraised value (0.95 * $90,000 = $85,500) since the appraisal is the limiting factor. The hypothetical buyer would either need to renegotiate the contract to lower the sales price to match the appraisal OR would need to come up with the difference. This is a common and usually correctable issue.
The opposite could also occur. Using the same example of the $100,000 purchase price, let’s say the appraisal came back high at $110,000. That’s great news for the hypothetical buyer, because this basically means that they bought the property for less than it’s worth (according to the independent 3rd party appraiser)! However, that “extra value” doesn’t satisfy the down payment requirement. The buyer would still have to put 5% of the sales price down on the property ($5,000 in this example).
Once ALL required documentation for the loan is in AND the appraisal has been received and reviewed, the Underwriter can issue a Final Loan Approval!
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