The Step-by-Step Guide to Buying a Home in Idaho

• Idaho has a home-buying process that requires the use of an escrow agent, closing agent, or representative from a title company. These professionals are used to complete the purchase transaction.
• When buying a home in Idaho, your funds and the purchase contract will be held in escrow by a neutral party. They will be released when the agent or representative confirms that everyone has completed their roles. The agent or representative will also prepare the new title.
• Documents are then signed and payments are made. The escrow company will then disburse all the necessary funds and the agent will deliver the house keys to the buyer.

Buying a Home in Idaho? Use this Step-by-Step Guide

Phase 1: Disclosures, Credits, and Home Inspections

Once you are in contract with a seller, these are the steps you need to take. In most cases, you can begin Phase 2 at the same time as Phase 1.

1. First, an offer will be accepted by the seller. Now a contract is signed and the escrow process will begin.
2. A deposit will now need to be made. This deposit is placed with the seller’s brokerage firm, an escrow agent, or an attorney, depending on the specific contract. It must never be delivered directly to the seller.
3. When buying a home in Idaho, you will receive a seller’s property disclosure, which is a mandatory form that must be delivered within 10 days of the contract signing. This will outline various disclosures related to the property and will include known flaws to the house and surrounding property. As the buyer, you will have to review and sign this document, acknowledging your awareness of the stated flaws.
4. You now have a specific number of days, as outlined in the contract, to perform any inspections to the property as you see fit. Typical inspections in Idaho include basic inspections by a general contractor, as well as termite inspections. You may also choose a property survey at this time. You’ll have a certain amount of days to complete inspections and respond to the current owner or selling agent.
5. If any flaws or issues are found during the inspections, you’ll now have a chance to report the defects and, if you wish, terminate the contract. However, you can also ask that the seller make modifications or provide credits for the closing costs to cover the price of repairs. The seller can now agree to the requests, negotiate a solution, or refuse to make changes. Depending on the seller’s response, the buyer can either accept the response, continue negotiations, or walk away from the contract and recover their money, which is still held in escrow. For legal documentation, this must all be done in writing.
6. The buyer can now negotiate a home warranty if they wish. Also called a home protection plan, this covers major appliances for about a year in the event of a failure.

Phase 2: The Mortgage Application and Approval

For people who borrow money to purchase a home, which includes most homebuyers, the mortgage application can be one of the most stressful and prolonged phases. However, if you start early, compile the right documents, and follow the steps, it can be easier and faster than you might think.

1. To start the mortgage process for buying a home in Idaho, you will submit a loan application to your lender. This will be done either directly or through a mortgage broker. Pre-qualification should have been completed already.
2. The lender will then calculate an estimate of the closing cost and send it to you in a document called a “good faith estimate,” also known as a GFE. Be aware that the final costs may differ, as this is simply an estimate.
3. Working with your lender, you will now have to send a wide variety of information and financial disclosures. Specific documents will vary, but you can generally expect to need the following:
   – Bank statements for all the accounts that you own. This should include several months’ worth of information.
   – Information on outstanding loans, financial liabilities, and lines of credit. It can include documentation of rent payments as well.
   – Tax returns for the past two years. This should be released to the lender through the IRS’s Form 4506-T.
   – Contact information and pay stubs from your current employer.
   – Any other disclosures that are related to your financial situation. For example, if you pay or receive child support, it should be included. This can also include divorce settlements, court judgements, bankruptcies, and liens against your property.
   – You’ll also need to explain any credit inquiries, as these can impact your credit risk in the eyes of lenders.
   – If you have received any large payments, you’ll need to explain this income to lenders. Gifts can be helpful for funding a down payment, but your lender may request information on the gift in the form of a gift letter. This letter will outline the nature of the gift and state that it is not a loan, which is extremely important. Whether or not you need a gift letter will depend on the size of the deposit compared to your overall income. For example, a $5,000 gift to a person earning $30,000 a year may require a gift letter. But the same amount to someone earning $150,000 will probably not call for a letter.
   – Although it may seem silly, the lender will request verification information on some or all of the above documents. To reduce risk, they may want to double-check information such as your income or your total debt load. You may, therefore, be asked to bring multiple copies of pay stubs, rent information, or bank statements. Also, if there is a change in your financial picture, you may need to start the process all over.
4. The lender will now give a preliminary approval decision, assuming all your information checks out. If approved, they will issue a preliminary loan approval, officially stating that your credit, income, and debt ratios are sufficient to fund the loan. There may be conditions however, including appraisals. It will generally include conditions regarding any material changes to your loan; basically, this condition says the loan can be dropped if you have changes to your financial or credit situation.
5. Within a specific number of business days, the buyer must provide conditional-approval documents to the seller. This document will state that the buyer will be approved for the loan if the appraisal comes in equal or above the purchase price. This is basically a letter stating the lender’s commitment, and providing this document results in a loan contingency to the contract. If the buyer is unable to provide this letter by a certain date, the seller can inform the buyer and cancel the contract.
6. The appraisal is then ordered by the lender or a mortgage broker. This is done through a directory of appraisers, which is sometimes called the Appraisal Management Company. The lender or broker cannot choose a specific appraiser, but they can request a different one if they wish. If the appraisal comes in lower than the purchase price, the lender can decline to issue the loan, as lenders don’t want to fund a mortgage supported by a less-valuable property. Unless a change is made to the value of the home or the size of the down payment. In most Idaho contracts, an appraisal contingency is stated, which requires the property to appraise at or above the purchase price, or else the buyer is entitled to walk away from the contract and recover their money held in escrow.

The mortgage-approval process can be time consuming and frustrating, so we encourage you to start as soon as possible. With proper preparation, you can complete this phase quickly and move on.

Downpayment Assistance Programs in Idaho

Idaho buyers struggling to save a mortgage downpayment can find support from a variety of state, local, and regional organizations.

Statewide Idaho Downpayment Assistance Programs

There are programs available to all eligible buyers in Idaho. Most of the support comes from the Idaho Housing and Finance Association (IHFA), but there is an important non-profit that serves the state as well.

Idaho Housing and Finances Association Second Mortgage
This organization offers two forms of downpayment assistance, starting with a second mortgage that can cover 10% of the sale price. This option, essentially, gives you a loan that covers the downpayment, allowing you to avoid costly mortgage insurance.

Idaho Housing and Finances Association Forgivable Loan
This group also offers a forgivable loan. With this program, 10% of the downpayment loan is forgiven annually, with complete forgiveness in ten years. These two programs can be combined, creating dual support for Idaho buyers.

Autumn Gold
This is a non-profit organization focused on affordable throughout Idaho. Among their efforts is a program that helps buyers overcome the burden of closing costs and downpayments.

Local Downpayment Programs in Idaho

Homebuyers in Idaho may also find support from local groups, as well as city and county governments. Here is one example of a downpayment program available in a specific area…

NeighborWorks Boise
NeighborWorks is a large-scale, nationwide organization that serves homeowners through local offices. One of their locations is Boise, where they provide downpayment assistance and other homeownership support. Aspiring homeowners can receive a downpayment loan that allows them to purchase a property (basically) with 100% financing. (The financing is structured as an 80% mortgage, 20% downpayment loan.)

Common Downpayment Assistance Requirements

Some programs require a small contribution from the buyer. For example, the IHFA requires that you contribute at least 0.5% of the purchase, which equals $500 for every $100,000 of purchase price. (Not loan total.) A purchase of $300,000, for example, would require a personal contribution of $1,500.

One of the most common requirements is an income restriction. These loans require that your salary remains under a certain amount. These community programs are for low-income earners and people with moderate salaries, so you’ll need to be around the area’s median income (or lower) to qualify.

Other requirements might include single-family homes, primary residence, and credit standards. If you want to learn more about the best downpayment programs in Idaho, contact our team today!

This article on buying a home in Idaho is meant for general information only, and should not be taken as legal or financial advice. Laws change, so always talk with a qualified professional before making any significant decisions related to real estate.

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