Floor three
Eight stages, in the order they happen, with the thing that usually goes wrong at each one named rather than skipped. Most of the anxiety in buying a house comes from not knowing what the next floor is; this page is the whole building at once.
Before you look
All four are arithmetic, all four take an afternoon, and all four are far harder to face once you have seen a house you want.
Two ratios usually decide how much a lender will lend: the housing payment against your income, and all your monthly obligations against it. Whichever binds first is your real limit, and it is often the second — which means a car payment can move your price range further than a quarter point of rate would.
Run the affordability page →Down payment, closing costs, prepaid interest and insurance, and the escrow deposit that opens the account. On a low-down purchase those last three together can rival the down payment. Counting them late is the most common reason a comfortable purchase suddenly is not one.
The four kinds of cash →Pull your reports, correct anything wrong, and let balances settle. After that, change nothing: no new cards, no financed furniture, no closed accounts. The file is re-checked shortly before closing, and every one of those moves the ratios the approval was built on.
See what a payment is made of →It is not always. Compare the two households on the same budget over the period you would actually hold the house, with the difference invested on whichever side is cheaper that month. Set appreciation to zero and see whether the answer survives — that sensitivity is the finding worth having.
Compare renting and buying →Looking and offering
Somebody verifies your income, assets and credit against documents and issues a conditional decision. It is not a guarantee — the file is re-underwritten against the actual house — but it is the difference between an offer a seller can weigh and one they cannot. Ask what it is conditioned on, because that list is what you will be chasing later.
A verified figure changes how you look: fewer viewings, better ones, and no falling for a house you cannot finance. It also tells you which of the three levers to pull if nothing fits — price, location, or the condition you are willing to take on.
Price is one term among several. Earnest money, the closing date, who pays what, and — most importantly — the contingencies. An inspection contingency, an appraisal contingency and a financing contingency are the three doors out of the contract. Waiving one to win a bidding war is a real decision with a real cost, and it should be made knowingly.
Under contract
Between an accepted offer and a closing date, the file leaves your hands and passes through an inspector, an appraiser and an underwriter. Knowing whose question each one is answering explains most of what happens next.
For you, not for the lender. A few hundred dollars against the largest purchase most people make, and the only stage where somebody looks at the house on your behalf rather than the loan’s. What you do with the findings — ask for repairs, ask for a credit, walk away, or accept it — is negotiation, and the contingency window is what gives you standing to do any of it.
An independent opinion of value, ordered by the lender and influenced by nobody. It answers one question: is the house worth enough to secure the loan? If it comes in low, the loan follows the value, and the difference has to be filled by the seller, by you, or by cancelling under the contingency.
The file is read against a rulebook. Expect conditions: a letter explaining a deposit, an updated statement, a payslip that arrived after the last one. Almost every delay at this stage is a document nobody asked for until late, which is why assembling the file early is worth more than any amount of urgency.
The closing table
By law it has to be in your hands at least three business days before you sign, and those three days exist so that you can read it. Put it beside the Loan Estimate you were given at the start and compare line by line. Anything that moved should have a reason, and asking for that reason is what the waiting period is for.
Walk the house again immediately before closing: agreed repairs done, nothing removed that was meant to stay, systems still working. Then you sign, the funds move, and the deed is recorded. The keys come at recording, not at signature, which is why closings occasionally end with an hour of waiting in a car park.
Line by line. Some figures are allowed to change and some are not; the ones that moved are the ones to ask about. This is the single most valuable thirty minutes in the entire process, and the three-day rule exists precisely to make room for it.
Government photo identification, and the money in the form the settlement agent asked for — a wire sent from an account you control, usually, rather than a cheque. Confirm wiring instructions by telephone using a number you already had, never one that arrived in an email.
It is your money held to pay the tax bill and the insurance premium when they fall due, collected monthly with the payment. It is reviewed annually, and it can move your payment even on a fixed-rate loan — the rate is fixed, the taxes are not.
The company you close with is not necessarily the company you will pay every month. Servicing is routinely transferred, and you are entitled to notice when it is. It changes nothing about your terms, and it changes everything about where the payment goes.
The numbers
Questions
Work out the ceiling. Not the price you would like, the price your income, debts and available cash support — and which of those three is the binding constraint. It takes minutes on the affordability page and it changes where you look, which is the decision everything downstream depends on.
No, and this is the most persistent myth in the whole process. Twenty per cent is the threshold above which conventional mortgage insurance is not charged; it has never been a requirement to buy. Several programmes start far lower and two allow nothing down for eligible borrowers. The trade is mortgage insurance, which is a cost worth pricing rather than a reason to wait five years.
The lender will lend against the appraised value, not the contract price, so a gap has to be filled by somebody: the seller lowers the price, you bring the difference in cash, you split it, or the contract is cancelled under its appraisal contingency. The loan does not stretch to cover it, and that is the point of having the contingency.
No, and they answer different questions for different people. The inspection is for you: what is wrong with the house. The appraisal is for the lender: what the house is worth as security. An inspection is not usually required by the lender and is nearly always worth paying for anyway.
This site does not publish a number, because no lender controls it. The appraiser, the title company and the contract dates set the calendar, and a lender who promises a closing date is promising on behalf of three parties it does not employ. What is inside anyone’s control is how quickly documents are supplied, which is genuinely the largest variable.
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