A Step-by-Step Guide to Buying a Home in Oregon
- The escrow process in Oregon is similar to other states that use a closing or escrow agent. A representative from a title company can also be used for escrow purposes.
- The buyer’s money is held by a neutral third party along with the purchase contract. They are released when the escrow agent verifies that all parties have responsibly completed their roles.
- Documents are now signed and payments are made. Within a few days to a week, the escrow company will disburse all the funds and the seller’s agent will deliver the keys to the new buyer!
Phase 1: Disclosure and Inspections for Buying a Home in Oregon
When you are in contract with a seller, these are the first steps of the process. You can usually complete the steps in Phase 2 at the same time.
To complete the disclosures and inspections phase, you will follow these steps:
- A contract is signed once the offer is accepted by the seller. This will launch the escrow process.
- A deposit is placed with the seller’s real estate broker or an escrow agent. It could also be placed with a representative from the title company, but it must never be given directly to the seller. Escrow companies may be a separate division of the title company.
- Now you will review and sign off for any disclosures provided by the lender. These disclosures will vary, but they are essentially an upfront communication of any known issues for the home. Sellers will see it as beneficial to disclose issues right away and, because they have been disclosed, will be less likely to provide a reduction in price or credits. (A buyer is expected to factor the disclosures into their offer.)
- You will now have a certain amount of days to have the home inspected and communicate any issues that are uncovered. A termite inspection and a home inspection are usually completed for homes in Oregon. However, a property survey and other inspections may also be requested by buyers.
- If the inspections discover any issues, you’ll have a certain amount of days to communicate these problems and request changes. You can accept the offer as is, request a negotiation, or ask for a complete remedy. The seller then has an opportunity to respond, and they can either accept or decline your request or offer a compromise. This process will continue until a solution is reached, and the buyer can exit the deal and recover their finances if they wish.
- If the house was built before 1978, a lead paint inspection can be requested. You must complete this inspection and communicate the results (as well as your requests) within a specific number of days.
- As the buyer, you can now negotiate a home warranty. This warranty will cover failures to any major appliances for a specific period; usually about one year.
Phase 2: The Mortgage Process in Oregon
Most people purchasing a home will need to take out a mortgage loan. While this allows people to purchase a comfortable, reliable home, the application and approval process can become complicated. However, if you prepare properly and work with the right team, it can be much easier.
To complete the mortgage process in Oregon, be sure to follow these steps:
- The first step will be to file a mortgage application to your lender, which can be done directly or through a mortgage broker. (At this point, a pre-qualification or pre-approval through your lender should have already happened.) Buying contracts in Oregon will state the amount of days you have to file your application with the lender. If you file late, you will be out of compliance with the loan contingency.
- The lender will now send a “Good Faith Estimate,” typically known as a “GFE.” Although the final tally will likely differ slightly, this is a breakdown of the final costs for the closing.
- The lender will now have to commit a request for title commitment to the title company. The title company will now conduct a title search and inspect the title for quality. They will also look at findings from the property survey. Assuming everything checks out, a title commitment is prepared, certifying that the title is free and clear of any issues and is ready for sale. Title insurance will usually be arranged at this point. You will have a certain number of days to voice concerns on any issues discovered during the title search.
- You’ll now have to send a variety of information to the lender. While the specifics will vary depending on the nature of the loan (and the credit profile of the borrower) they will generally include the following financial statements:
– Information on your bank accounts, including bank statements from all accounts you own. (Usually several month of statements.)
– Information on current debts, including loans, lines of credit, and other financial liabilities. If you pay rent, you should include this as well.
– Up to two years of tax returns. These will be release by the IRS to your lender, and you’ll need to sign specific information to allow the release.
– Recent pay stubs and contact information for each borrower’s employer. Couples applying together should include all employers, including full and part time employment.
– Any disclosures that impact your financial situation. This can include a lot of information, including marriage licenses, divorce settlements, child support, bankruptcies, and court judgements. This information should include money that you owe, as well as money you receive.
– Explanation of credit inquiries, which statistically impact a borrower’s risk level.
– If you have any large deposits, they will need to be substantiated and clarified with your lender. Large gifts can often look like loans in the eyes of a lender, so they will want information on the deposit, which usually comes in the form of a “gift letter.” A gift letter provided by the donor essentially tells the lender that the money is in fact a gift and not a loan. It should include the donor’s information, including name and contact information. The amount that triggers a gift letter will depend on the size of the deposit compared to your income. (The larger the deposit and the smaller your income, the more likely you will need a letter.)
– In some cases, you may need to provide repeat or updated information to back up any of the above documents. Lenders take on a lot of risk when they write a loan, so they will request as much information as they need in order to feel confident in your ability to repay. Don’t be surprised (or offended) if they ask for multiple sources of information verifying your income or debt load. This is just a way of reducing risk and assessing your eligibility, and, assuming everything checks out, it will increase your overall chances of swift approval.
- The lender will give a preliminary decision on the loan. If everything goes well, they will issue preliminary loan approval, which will state their intent to fund the loan when certain conditions are met. These conditions will include an appraisal, which helps the lender verify the value of the property. It will also include a condition stating that there should be no significant changes in your financial situation. The lender may also deliver a loan commitment letter that is contingent on the appraisal results. (If the appraisal comes in low, there may be issues with the loan. See Step #7.)
- When buying a home in Oregon, there will usually be a requirement that the buyer perform due diligence in their loan application and apply for a loan within a certain number of days after the contract is created. However, there is not a specific loan date, as you would find in other states. Your contract may differ, so check the paperwork for important dates and contingencies.
- An appraisal is now ordered by the lender or mortgage broker. This is done through a central directory of appraisers, and while they can’t request a specific lender, they can request a different one. If the new appraisal come in low, the lender can decline to write the loan unless changes are made. These changes can be a reduction in the purchase price or an increase in the size of the down payment, both of which would reduce the loan size. In Oregon, there is often an appraisal clause that requires the property be at or above the purchase price. If the appraisal is low, the buyer is allowed to walk away and recover their escrow money.
- You will now need to purchase homeowners insurance, which is usually required by the lender to protect their financial investment. In some cases the insurance may already be provided through an HOA, but you will need to provide documentation regardless.
- Hazard insurance should also be ordered if required by the lender. This can include insurance for damage caused by fire, storms, or floods.
Remember that the process for securing your mortgage can be long and complex, requiring many different documents. It’s best to start early and get the documents as soon as you can. If you can’t actually secure the documents, at least research how to get them at the appropriate time. Also, avoid switching jobs, taking out large loans, or leasing vehicles during the mortgage application, as this could cause a reset in the entire process.
Phase 3: Closing the Deal
Compared to the other phases, especially Phase 2, closing the deal is usually fast and simple. When buying a home in Oregon, the closing process will generally take a few days to a week, and the transaction will not need to be consummated with all parties sitting at the same table at the same time.
Oregon is an escrow state, so closing will follow these specific steps:
- Your lender will send final loan documents to the escrow agent in charge of the transaction and a settlement date is scheduled.
- A final walkthrough, which will verify the condition of the house, is performed.
- The settlement itself will be done at the office of the title company, closing agent, or escrow agent.
- The seller will sign the closing documents first, then the buyer will sign all necessary paperwork.
- You will now have to pay the remaining funds for your down payment and closing costs. This will be given to the escrow agent, closing agent, or title-company representative. This can be done with a wire transfer or a cashier’s check, and can be sent early to speed the process.
- The deed will now be recorded with the right municipality and the escrow agent will disburse the funds.
- The deal is now complete! Unless there are any clauses in the contract, you will receive the keys and take official possession of your new property!
This article is meant for general information only and should not be considered legal, financial, or real-estate advice. Before making any decisions, always speak with a qualified professional, including an attorney and real estate expert. Laws will change, which could render any of the above information inaccurate or out-of-date.