- For real estate purchases, Connecticut is unique compared to many other states.
- Connecticut real estate purchases must be closed by an attorney. This is especially important for drafting the legal documents that finalize the sale.
- There is usually an attorney review at the start of the process.
- The buyer and seller will complete the transaction together at the same table.
Phase 1: Negotiations for Your Connecticut Property
Although you have agreed on a price for your purchase, now is the time to finalize the details, including repairs and updates before the sale is final.
- First you will have an offer accepted by the seller, which will launch an attorney review. In Connecticut, changes can be made to the contract during this time, but they must be agreed upon by both parties. The attorney review lasts 72 hours.
- Earnest money is now given from the buyer to the attorney. This money should never be given directly to the seller.
- The buyer now has the chance to perform a variety of inspections. In Connecticut, it’s best to get a general home inspection, as well as inspections for mold, termites, and other environmental factors.
- In the state of Connecticut, there are some inspections that are typically recommended, including:
- An inspection, certifications, and decommission of a buried oil tank. These tanks were used to store home-heating oil, but they are now environmental hazards that must be decommissioned.
- A well test to ensure the home’s water is safe.
- A flood search to see if the property is not in a flood zone.
- A certificate of occupancy. This document proves that the property can be safely occupied.
5. If the inspections discover any problems, the buyer can request changes to the contract. The seller can accept the changes, offer a negotiated option, or deny the request. Negotiations will continue until an agreement is reached.
6. The buyer now waives the inspection contingency and is unable to perform further inspections on the property.
7. The negotiations are now complete and, as long as financing is approved, the deal should be ready to move towards a final closing.
Phase 2: Securing the Mortgage
During this phase, you will complete the mortgage approval. Even though you were probably pre-qualified, you’ll have to go through a series of steps before completing the loan.
- This phase starts by submitting a formal loan application. This can be done with a professional or independently.
- Within three days, you should receive a “good faith estimate.” This does not mean you are approved, but it’s instead a statement of the estimated costs you will need to finalize the loan.
- The lender will request a variety of documents, including:
- Tax returns
- Paystubs
- Debt information
- Credit reports (They will need your consent to pull the report.)
- Bank statements (Up to two years.)
- Financial disclosures (This can include anything that impacts your financial situation, including alimony, child support, legal judgements, and liens against your property. You’ll include items that both positively and negatively impact your finances.)
- Explanation of recent credit inquiries
- Information on large deposits outside of your normal income. (If a lender sees a large deposit on your bank statement, they may request a “gift letter” that outlines that nature of the deposit.)
- Repeat and updated information. (Lenders may request additional documents if enough time has passed since they last viewed your income documents.)
4. You should now receive a loan commitment letter, which outlines the lenders intention to support your purchase. (If rejected, you will get a letter saying so and will have a chance to work towards loan approval.) The loan commitment usually has requirements, including a home appraisal.
5. The financing contingency can now be removed. If you need an extension, you’ll have to submit a letter to the seller stating your needs.
6. An appraisal will be ordered by the lender or mortgage broker. If the appraisal comes back low, the lender may decline to finance your purchase. They may also request a change to the purchase price or the details of the loan (such as a larger down payment) in order to fund the purchase.
7. You will now need to order homeowners’ insurance and provide proof of this insurance to the lender.
Phase 2 is not complicated, but there are a lot of steps. It’s best to start early and compile your documents as soon as possible. During the mortgage process, avoid making any changes to your financial situation, especially new debts that could harm your chances of final approval.
Phase 3: Final Closing in Connecticut
Now you can prepare to close the deal! This is an exciting time, as you’re almost ready to take possession of your Connecticut property. But first, you need to take a few more steps…
- A title search will be completed to ensure there are no ownership issues with the property. This should be done as early as possible, creating time to deal with any issues if they are discovered.
- The attorney will begin creating the paperwork to finalize the purchase. The title or deed will need to be prepared to complete the transaction.
- A closing date will be scheduled.
- A final cash figure is calculated. This is the amount the buyer will need to finalize the purchase, and it will include the downpayment, origination fees, and other costs.
- A final walkthrough is performed just before the closing.
- The buyer and seller will meet at the closing and sign all documents.
- A representative from the title company will record the transaction.
- The buyer can now take possession of their new Connecticut home!
Congratulations! After completing this phase, you have finalized your Connecticut real estate purchase.
Connecticut Conforming Mortgage Loan Limits
Across the country, mortgage limits are set by the Federal Housing Finance Agency. This group looks at home prices in all corners of the country and sets the limits for government-supported loans, including Fannie Mae and Freddie Mac loans. These limits are set on a county-by-county basis, so a high-priced neighborhood and a low-priced neighborhood in the same county have the same limits.
Most of the country is under the base limits, and this is true for all of Connecticut expect one county. In most areas of the state, the limit for a single-family home is $647,200, while the limit for a two-unit is $828,700. For a three-unit property, the limit is $1,001,650, and the limit for a four-unit home is $1,244,850.
However, in Fairfield County, the limits are even higher. In this high-cost county, you can get a conforming loan on a single-family home up to $695,750. For two-units, the limit is $890,700, while three-unit properties have a conforming limit of $1,076,650. If you want to purchase a four-unit property in Fairfield County, Connecticut, you can get a loan up to $1,338,000.
These limits will change, so always check with your lending professional for updated loan limits. Also, it should be noted that not all borrowers will qualify for the top limits.
If you need a loan larger than the conforming limits, there are options. Jumbo loans in Connecticut allow for the purchase of larger and more luxurious homes.
Downpayment Assistance Programs in Connecticut
Buyers in Connecticut who are struggling to generate a downpayment can look to a variety of downpayment assistance programs. These programs offer both loans and grants that can help you overcome the significant barrier of saving for a downpayment.
Offered through state, county, and city governments, as well as non-profit organizations, downpayment assistance in Connecticut is crucial to a thriving real estate market and longterm financial stability.
Statewide Programs in Connecticut
There are various organizations, agencies, and groups that provide downpayment assistance in Connecticut, but the one that probably issues the most support is the Connecticut Housing Finance Authority (CHFA), which provides support throughout the entire state.
Time To Own: Forgivable Down Payment Assistance
Available “for a limited time” (check with our team to see if it’s still available), the CHFA’s Time to Own provides forgivable downpayment assistance in for form of a 0% loan that can be forgiven. 10% of the principal balance can be forgiven annually until the loan is fully forgiven after ten years. Some buyers can receive support as high as $50,000!
Down Payment Assistance Program (DAP) Loan
Also available through the CHFA, this program provides financing that can cover downpayments and closing costs, with assistance as high as $20,000. It comes as a low-interest second mortgage.
Major Local Programs
Numerous city and county governments direct taxpayer and investor resources towards downpayment support. Here are two examples.
Home Bridgeport
The city of Bridgeport works with Building Neighborhoods Together to provide downpayment assistance to first-time homebuyers. Home Bridgeport provides forgivable loans as large as $25,000 for downpayments and closing costs.
HouseHartford
The city government for the state’s capital offers the HouseHartford Homebuyer Assistance Program. This program assists homebuyers in the city limits and allows for the purchase of multiunit properties, although there may be occupancy requirements.
Other cities and counties offer downpayment support in Connecticut. Contact our team for downpayment programs in your area.
Common Requirements for Connecticut DPA Programs
If you are interested in Connecticut downpayment assistance, you will need to meet certain requirements. Most common is an income requirement; you must be a low- or moderate-income earner to qualify for support.
Each program is different. For example, support through the CHFA requires that you attend homebuyer education classes. Some may also require that you contribute a certain amount (however small) of your own cash. A requirement of $1,000 from the buyer is common.
Because every program is different, you must work with a lending expert who can find a Connecticut downpayment option that fits your needs.
