A mortgage professional will want some basic financial information about your income, debts and savings before providing a pre-approval letter. He or she will also run your credit score. At this stage, there isn’t a need to shop around for the best loan terms because you haven’t found a home and a lender isn’t going to lock in an interest rate.

You are not under any obligation to obtain your loan from the lender that provided a pre-approval letter, but you should allow that mortgage professional to compete for your business once you have found a home. Besides letting you know how much of a home you can afford, the pre-approval process is a good time to ask questions about what additional documentation you will need before you will obtain a loan commitment (see below). In addition, you’ll need a pre-approval letter in order to make an offer on a home.

Once you find a home you want to make an offer on, your buyer agent should perform a comparative market analysis, also referred to as a “CMA.” When you have your initial meeting with a buyer agent ask how he or she puts together a CMA and what information will be provided to you, so you can make an educated decision about the market value of the home you want to buy. You should also discuss a negotiation strategy with your real estate agent. Just making an offer and waiting to see what happens is not an effective negotiation strategy. An initial offer should be made with your anticipated last offer in mind. Home buyers with a negotiation strategy increase their chances for a successful outcome.

A written offer is submitted by your buyer agent to the listing agent, who works for the seller. Included with the offer will be a copy of the first deposit check, typically $1,000, and a copy of your pre-approval letter. Circumstances may vary, but it is customary to provide the seller with about 24 hours to respond to an offer. A written and signed offer is a binding contract.

The purchase and sale agreement (P&S) is a more detailed contract between the buyer and the seller. It is customary for the listing office to draft the “Standard Form Purchase and Sale Agreement,” but a buyer should have his or her real estate lawyer review the P&S. A buyer’s lawyer likely will add an addendum to the P&S that contains provisions that protect the interests of the buyer. The P&S also contains the date of the loan commitment (see below) deadline, which is the last day that a buyer can withdraw from buying the home without putting the deposits at risk due to an inability to obtain financing.

It is customary in Massachusetts that the buyer make an additional deposit ($1,000 was made at the time of the offer) when the P&S is signed. Depending on the type of financing a buyer plans to obtain, the additional deposit may be the balance of 5 percent of the price of the home, but it may be less than that in some cases. The two deposits are held in escrow until the closing (see below) by the listing office.

Typically, a closing takes place between four and eight weeks from the time an offer is accepted. The closing usually takes place at the closing attorney’s office or the Registry of Deeds in the county where the property is located. There are a number of legal documents that a buyer must sign at the closing, most importantly the note (promise to pay back the loan) and the mortgage, which gives the lender the statutory right to take possession of a home for failure to repay the note.
Also, on the closing date, or the day before, the buyer should complete a final walk through to make sure nothing unexpected has happened to the property and all personal property not conveying with the sale has been removed. Congratulations! You now have your own home!