The Documents You Need to Buy a New Home

If you are financing your home—and the vast majority of first-time homebuyers will—you should take a look at your credit information before you begin applying for mortgages or even considering houses. Your credit score will have a profound impact on your ability to obtain financing, so it is important to know where you stand before you get the process started.

You can get a free credit report once a year from AnnualCreditReport.com. Other sites offer less complete information regarding your credit score that you can check more often as well. Regardless of how you check your report, you should.

One of the most important reasons to check your credit score is to ensure that the information on the report is accurate. Inaccurate information can result in a much lower credit score. If you have a dispute, you should take care of those issues before you begin the mortgage application process. It can take considerable time and effort to dispute derogatory marks on your credit report to repair your credit score, so start the process early.

You may also need to consider saving for a down payment. While down payments are not always necessary, depending on the type of financing you use, having a lump sum to put down on the home can significantly decrease your monthly obligations. It can also make a seller more likely to accept your offer on a home.

The type of paperwork you need will also depend on where you are in the home-buying process. If you have not yet been approved for a mortgage or financing, the documents you need at that point may look very different from the actual sales materials.

Getting your pre-approval letter is one of the first steps in the home-buying process. Your financial institution will require extensive information about your identity and finances to obtain this letter. The pre-approval letter provides you with preliminary approval for a set amount of financing for your home.

Getting the pre-approval letter first will allow you to get a better idea of what type of mortgage payment you can afford and how much financing you can obtain. You can certainly start the house-hunting process without the letter, but potential sellers will be more likely to assume that you are a serious buyer if you already have your pre-approval letter in hand.

Examples of the necessary documents to obtain a pre-approval letter will include:

• copies of current pay stubs for at least the last two pay periods;
• W-2 information for the last calendar year;
• copies of your federal tax returns, including all of the schedules;
• bank statements for the past two or three months;
• asset statements (stocks, bonds, retirement accounts, etc.); and
• a copy of your current driver’s license.

You may also need additional information, which will vary depending on your financial situation. For example, after taking a close look at your bank account records, your lending institution may ask for more details about how money was spent or for an explanation of large, recent purchases.

You must write up a formal offer to get the negotiation process started. The proposal will include vital information, such as:

• the total purchase price,
• the initial good-faith earnest money to accompany the offer,
• how the remaining purchase price will be paid,
• details on closing and possession, and
• any contingencies (such as finding suitable financing or selling another home).

The document used to convey an offer and acceptance is often referred to as the purchase agreement. It contains all of the necessary conditions for the sale and what exactly is being sold.

Once you have made an offer on a home and it has been accepted, you will receive additional information about the house. This information may result in a renegotiation of the price or may even discourage you from making the purchase altogether. The following documents are necessary to finalize the sale.

• The seller disclosure statement – One such document is the seller disclosure statement. This report provides a summary of the seller’s knowledge of the property. It will include information about prior work done to the home, potential problem areas, and any updates or construction that was performed on the home. It is designed to provide any and all information about the home that could negatively affect the value, use, or enjoyment of the property. Required seller disclosures will vary by state, but there is usually a form that you must use as part of the sales process. Generally, the form will be a series of yes/no questions with space for seller explanations.
• The home inspection report – Although it is not technically required, it is a good idea to have a comprehensive home inspection on the property. A home inspector will perform a visual examination of all of the vital parts of the home, including high-ticket items such as the foundation, electrical systems, and plumbing. Large appliances, such as the air conditioner, water heater, and furnace, will also be inspected. The inspector will provide a report of the conditions of the home. The report will point out problem areas that may be concerning for you. If the problems are minor, the report can serve as a handy to-do list for small projects down the road. The report may also suggest regular maintenance tasks that can be extremely helpful for a first-time homebuyer. A home inspection can provide additional information you can use to renegotiate the price of your home as well. You may be able to reduce the price if you can show the seller that you will have to perform substantial repairs. You may also be able to ask the seller to carry out some of these repairs before you go through with the purchase of the home.
• Pest inspection – Pests such as rodents, bats, and termites can cause health problems and may even compromise the structural integrity of the home. Again, although it is generally not technically required, it is a good idea to get a pest inspection of your potential new home. If there are problems, you can use the information as a negotiation tool or request that the seller deals with any pest issues or damage before the sale goes through.

Once you have decided on a potential home and the seller has shared additional information regarding the home, you will begin to see a lot of unfamiliar paperwork to actually finalize the purchase. Most of these documents will be prepared and reviewed by the seller and then delivered to you.

Although the documents for the mortgage and the real estate transfer are often presented together, they are really two separate legal processes. The property transfer will require the following documents:

• The deed – A deed legally transfers the property from the seller to the buyer. You can choose the type of ownership you take, including individually, in trust, in joint tenancy, or other forms of tenancy. Once the deed is completed, it will be filed with the County Recorder so that it can be correctly added to the chain of title for that property. There are several types of deeds that you may use as well. Each kind of deed has different warranties regarding the title attached to it. For example, a general warranty deed is the most common way to transfer property. It guarantees that the seller has a clear title to the property and has the authority or right to sell the real estate. Other types of deeds, including quit claim deeds, offer far less protection if the title to the property is challenged.
• The bill of sale – If the house is being sold with personal property, such as air conditioners, appliances, or light fixtures, you may also need to use a bill of sale. This document will set out which property is included in the transaction outside of the real estate itself.
• The seller’s affidavit or certificate of title – The name of this document will vary by state. However, it is an affidavit from the seller that confirms ownership of the property. It also describes any defects in the title, including leases, liens, or potential disputes that may arise which may affect the title. Unlike the seller’s disclosure, this document is focused more on the title than on the condition of the home itself. As the title of a piece of property is so important, most states offer you the option to obtain title insurance. Title insurance protects you if there is some problem or defect with the title that crops up after the real estate sale has been completed. If the seller ends up not actually having clear title to the property, the sale in its entirety could be voided. Title insurance protects you from potential losses associated with defects in the title, and can defend you in a title dispute.
• Transfer tax declarations – Although this document is not required in every state, some localities or states require that the buyer and seller disclose the purchase price of the home in a formal document. This permits the taxing authority to calculate sales tax or other taxes affected by the sale price.

If you are also obtaining a mortgage on the home, you will be required to complete additional documents. Unlike the sale papers, mortgage documents affect only you and your financial institution.

• The note – Your “note” is the description of the debt actually owed to the lender. It sets out the loan terms and how you will repay the loan. It also includes information on the applicable interest rate and for how long you will make payments.
• The mortgage – The mortgage is the document that connects the note to your collateral—your new home. It indicates that if the note is not repaid, then the collateral can be repossessed (or foreclosed upon) and sold to pay the outstanding obligation associated with the note.
• The loan application – Your loan application provides virtually all of the information that you gave to the lending institution. They simply ask you to review the summary of information and confirm that it is accurate.
• The loan estimate and closing disclosure – This document provides helpful information regarding your loan. The information is summarized so that you have all of the vital information about your loan in one location. It is designed to help buyers better understand their rights and obligations under the agreement.

Selling your home on your own may be challenging, but it is certainly possible. It can also cut down significantly on costs associated with paying realtors and other professionals. Find the legal forms you need to sell or buy a home in our property documents section or from the links below.

• Property Purchase Agreement
• Deed of Trust Form
• General Warranty Deed Form
• Property Deed Transfer Form
• Quit Claim Deed Form
• Mortgage Agreement Template