Navigating the Home Buying Process

I purchased my house in September 2020. Since then I have been bombarded with questions on all aspects of home buying.

My husband and I began browsing for houses casually in March. We looked for them mainly on Zillow and Redfin. We had no budget, size of house or location in mind. But looking at various houses gave us a fair sense of what we could afford and which areas were affordable.

In June, we found a house in Livermore, CA that looked beautiful and matched every criteria (that we thought of at that time). This led us to look for realtors. You can find realtors on Zillow, Redfin and even through internal company employee recommendations. The best way to find one would be through a recommendation from someone you know. We picked out realtors who matched our criteria from one of our company’s internal employee recommendations. We spoke to five realtors. With each conversation, we learnt something new about the home buying process. We finally decided on a realtor who connected best with us and understood our goals.

The next step in the process is getting a pre-approval. This process involves talking to different mortgage agents and working with one who you like the best. We spoke to different bank agents suggested by the realtors we spoke to. We began filling application forms and submitting documents to four banks to get a pre-approval. Even though we went with four banks, working with one bank is sufficient.

At this point we also decided what our budget would be. For purposes of a loan, you can put in a downpayment of any percentage. However, the most common ones given by banks are 10,15 and 20%. Apart from the downpayment, you should keep some money ready for closing costs, moving costs and other unexpected costs. We also decided that we would look for a two or three bedroom single family house — which has a backyard. It is also useful to check for online calculators for rent vs buy (or develop one on your own!) and also do other calculations to account for your affordability and other investment goals.

For the pre-approval, you need to specify the price of the house you are looking for. There will be a hard credit check done on all buyers. The pre-approval requires you to submit your proof of funds to the bank. The letter is generated fairly quickly and will be valid typically for a period of 60 days. This letter is important as it submitted when making an offer on a house. A way to strengthen your offer and also feel more confident in getting your loan approved is to get it underwritten. This process typically takes around 2 weeks once you submit all your documents. They are reviewed by an underwriter, who then conditionally approves your loan.

Simultaneously, our realtor had created a portal with all the criteria we shared with him. This portal would auto send links to houses by email everyday. I also suggest using Zillow’s recommendations as they showed me pretty good results too. We would message our realtor with the houses we liked and we would visit 2 to 4 houses at a time. Due to Covid-19 restrictions, we did not have a chance to attend any open houses. We had to make an appointment through our realtor to visit any house. My realtor would batch the houses back to back, so that we could see many together. We typically spent 20 mins in every house we saw. You can take photos and videos of the house if you like too.

As you see different houses, you realize what works for you and what doesn’t. You start to reject houses better online too as you begin to understand your dealbreakers. One of the things my husband and I did was we came up with a set of criteria on what was important for us. We then developed a rating system out of 100, on which we both would independently rate, for each of the houses we saw. Our idea was to make an offer for any house that crossed 90 points. Below are the categories we looked at, ranked in the order of importance for us.

With many of the houses we saw, our realtor provided a list of documents to check. Some sellers do a home inspection and provide you with the inspection report. If the house has an HOA, you can also see the CC&Rs, which describe the requirements and limitations of what you can do with your property.

We found a house we liked fairly quickly — within the first month. We had seen around 12 houses at this point. People usually look around for a much longer time, almost 6 months. But since we had crossed 90 in our criteria list, we decided to put in an offer for the house.

Houses in the Bay sell extremely quickly — good houses are gone within a week of listing. This house came into market on Thursday. We first saw it on Sunday morning, and made an appointment to see it the following evening as well. We also went to the neighborhood at night and checked out the area. The following day, after seeing the house for the second time, we also got a chance to see another house in the same community. This gave us an idea on other houses in the community. This second house was also for sale. However, we didn’t like the floor plan. We had decided to put an offer on the first house. After much discussion with our realtor, we came up with an offer price. This price was lesser than the listing price, but our realtor had given us a market value for the house, and we did not want to exceed that price. House offers have a very short expiration period. The offer we made on Wednesday night was valid only till the next day afternoon for the seller to accept. The seller got back to our realtor asking us to increase the offer and made a counter offer less than their list price. We increased our offer slightly, but did not match their counter offer. We also said that this was the last price we were willing to offer. That evening, the sellers agent told us they were going to pass on the offer. We did not offer anything else and prepared to see other houses. But the next morning the sellers agent called our realtor and said that they would accept our offer if we wanted to make the same one again. And so, we were in contract with the sellers on our first home!!

The contract is a purchase agreement signed by the sellers and the buyers. It will contain the purchase price of the house and how the buyer will finance the house (it could also be an all cash deal).It specifies the earnest deposit amount and is usually 3% in California. The contract also specifies the number of days by which the sale will be finalized .You also list the contingencies on the offer. Contingencies are conditions that must be met before the sale can go through.

Loan Contingency — The sale of the house is contingent on the buyers’ loan being approved.

Inspection contingency — The sale of the house is contingent on an inspection of the house by the buyer.

Appraisal contingency — The sale of the house is contingent that the home must appraise at a value equal to or higher than what the buyer agreed to pay. An appraiser will be appointed (usually by the bank) who will value the house.

In our case, we had only put a loan contingency for a period of 10 days. This meant that at the tenth day after we went into contract, we would either remove this contingency or we would break out of the contract. It gave us a ten day period to verify with our loan agents that we would definitely get the loan.

Within 24 hours of getting into contract, you are expected to put in an earnest money deposit.Once you are in contract, someone from the escrow company will contact you. We received an email with the details of the bank account to deposit this money. It is often advised that you make a call to the title company to verify this information to avoid fraud. This earnest money is refundable only if your contracts break due to a contingency listed in the contract. If you are not able to purchase this house for any other reason, this money is lost.

As you get ready to make the earnest deposit, it is also important to call different banks and credit unions and find out the best rate of interest. Some banks are able to match the rate from other banks. If you have worked on getting an underwritten loan approval with a bank and they have a policy to match rates, it will significantly speed up the process for you. Once you decide on the bank or credit union, you can lock your rate for a specific period of time. It is also important to verify with the bank/credit union that they are able to close by the day specified in the contract.

After this, you will be expected to re-submit all your latest documents to the bank. The bank will redo the checks it did during the underwriting, as well as verify the conditions listed in the conditional approval. The bank will also send an appraiser sometimes to the house to determine the market value of your house. Sometimes this appraisal process can be waived off by the bank. As long as you did not dramatically over offer in your contract, this process should not have any issues. In the next few days, you will be in touch with mortgage agent, giving them the documents they require. In the meantime, you will also be expected to shop around for home insurance.

Usually on the day before what is specified on the contract, but sometimes before, the bank sends the closing documents to the escrow company. You get to verify this a few days before too. Once the escrow company receives these documents, they give you a call to schedule a time for signatures. You can either call them to your house or any location you prefer or you can visit the escrow office. Here, you will meet with a notary, go through all the documents with them — mortgage, title information and other paperwork. You can make corrections and sign the paperwork.

The funding date can be date of closing or one or two days later. Once you sign the paperwork, it is sent back to the mortgage bank, who then on the specified date releases the funds to the escrow/title company. This company then sends a request to record the transfer of property to the buyers. Within few hours, the city responds with the confirmation. Money from escrow are distributed to all the parties (seller, sellers agent, buyers agent etc.)

At this point, your realtor is able to hand over the keys to your new house and you are finally the proud owner!!

Useful Tips

Keep following up with the mortgage agent and bank. There are a lot of processes and its perfectly okay to keep asking the agent for the status.

When looking at criteria like lighting in a house, don’t forget to account for already switched on lights in the house as they could make a house look more well lit than it already is.

Don’t get caught up in imperfect looks like paint and flooring. Some of these things can be changed. Always try to imagine how you would live in and use the space.

What does a pre-approval letter look like?

An approval letter has the name of the borrowers, type of property (single family, townhouse, condo), Mortgage amount, sale price of house etc. This can be generated by a mortgage agent within a day. The sale price of the house on this document can be decided by you as long as you can provide proof of funds for the downpayment.

What does a conditional approval look like?

The conditional approval has basic terms of your loan — the loan amount, interest rate, loan term, monthly payment etc. It also has a list of required documents for your loan to be approved. These are things like proof of insurance, signed bank forms, pay cheques, proof of funds and their accounts. It varies on a case by case basis.

What are closing costs?

These are costs you pay beyond the downpayment of the house. These include Bank processing fee, title insurance, closing or escrow fee and other such miscellaneous costs.

Where did you buy your house? Which areas did you look in?

We bought a single family home in Milpitas, CA. We looked for homes in areas of Los Gatos, San Jose, Milpitas, Fremont and Newark.