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Your Guide to Buying a Home in Rhode Island

  • In the state of Rhode Island, attorneys take an active role in the process and must be present at the closing. 
  • The homebuying and closing process is similar to other states that use a real estate attorney or representative from a title company to complete the transaction.
  • For most transactions, the purchase will be completed with the buyer and seller at the same table. 
  • There are specific environmental factors for Rhode Island that must be considered when making a purchase. 

The Step-By-Step Process For Buying A Home In

Phase 1: Negotiations

Once you have come to an agreement on a purchase price, you and the seller will need to negotiate specific details, including repairs and upgrades to the property before it is sold. 

  1. The first step is to have an offer accepted and a contract signed by both parties. 
  2. At the same time, a deposit, known as “earnest money” is paid by the buyer to a third-party representative who holds the money in escrow. This money essentially demonstrates the buyer’s honest intention to make the purchase.
  3. You should now receive disclosures from the seller. These disclosures will vary, but they will include known flaws with the property, prior repairs, and any potential hazards. This is usually provided early, giving buyers a chance to review and request changes if needed. 
  4. The next step when purchasing a home in Rhode Island will be the inspections. The buyer can elect to perform a wide variety of home inspections, but they must be completed by the “inspection contingency date,” which is outlined in the contract. The types of inspections will differ, but most buyers, at the very least, want a general inspection. Other inspections include termite, water-quality, and radon testing. 
  5. Before the purchase is complete, an inspection on a buried oil tank may be needed. In Rhode Island and other northeastern states, oil tanks were buried underground. These tanks now create an environmental hazard, so they should be decommissioned before the final sale. This may not be legally required, but it will reduce the risk to a new owner. 
  6. Well testing may also be required. 
  7. As the buyer, you have a certain number of days to report any issues found during the inspections to the seller.
  8. If any defects are discovered, you have a certain amount of time to give notice and request changes to the contract. The buyer and seller can then negotiate a settled solution to handle any repairs or other requirements before the sale is final. You can ask for changes to the purchase price or request that the seller make repairs before the deal is closed. The buyer and seller can negotiate as needed until an agreement is reached. If no agreement can be reached, the purchase contract can be ended without penalty to either party. 

Phase 2: The Rhode Island Mortgage

Most home buyers will use a mortgage for their purchase. The process for securing a mortgage can take time, so it’s best to start as early as possible. In most cases, Phase 2 can start at the same time as Phase 1. 

  1. You will first submit an application either by yourself or through a mortgage professional.
  2. You should receive a “good faith estimate” that outlines the estimated costs. The estimate will be as accurate as possible but the final number may be slightly different. 
  3. Now the lender will need you to send a variety of documents and financial disclosures. Requested documents may include: 
  • Bank account information
  • Information on current debts, such as credit cards and student loans
  • Tax returns for the past two years
  • Pa stubs
  • Employer contact information
  • Financial disclosures, such as child support, alimony, and legal judgements
  • Credit-inquiry information
  • Information on all large deposits outside of your regular income. If you have received gifts for a downpayment, you’ll need to provide a gift letter. 
  • Repeat or updated information on any of the above. For lenders, the more information the better, so don’t be surprised if they ask for additional documents. 

4. The lender will eventually issue a decision. Assuming you are approved, you will receive a loan commitment letter that states their willingness to support your purchase. This commitment will be dependent on certain conditions, known as “contingencies.” These contingencies will likely include an appraisal.

5. The mortgage contingency can be removed from the contract. If there are issues getting final approval, an extension may be requested. 

6. If the buyer is unable to secure financing, they must provide evidence of this rejection and they can walk from the deal with no penalty. However, if no letter is provided to the seller, the buyer may lose their earnest money deposit. 

7. At this time, an appraisal is ordered by the lending company. If the home appraisal comes back low, certain changes to the purchase price or the loan may be required. Some Rhode Island contracts also have an appraisal clause that allows the buyer to back out of the deal if the appraisal is too low. 

8. Homeowners’ insurance will need to be ordered and proof of this ownership must be provided to the lending company. 

9. Title insurance will also be ordered and verification given to the lender. 

Remember that this process is long and extensive. For the best results, prepare your documents as early as possible and avoid making any changes to your financial situation.

Phase 3: Closing the Deal in Rhode Island

Now you can close the purchase for your Rhode Island property. In Rhode Island, the process usually takes place at one table where all parties sign the documents and close the transaction. Once everything is signed, you can take possession. 

  1. First, a title search is ran just before closing to make sure there are no problems with ownership. If everything is clear, the closing can proceed as planned.
  2. The title company or attorney will begin preparing the paperwork for changing the title. At this time, the final closing can be scheduled. 
  3. A final cash figure will be calculated. This is the amount that a buyer needs to bring in order to close the deal, and it will include the downpayment and other fees
  4. A final walkthrough of the property is completed before the closing. This is to verify that the property is still in good condition. 
  5. The buyer and seller sign all documents to complete the transaction. 
  6. The buyer pays the remaining funds to an attorney or title-company representative. This is usually done with a cashier’s check. 
  7. The transaction is then recorded with the appropriate Rhode Island city or county. 
  8. You can now receive the keys and move into your new Rhode Island home!

Conforming Loan Limits in Rhode Island

Conforming loans, which are supported by the federal government in one form or another, have a variety of benefits that makes them ideal for many borrowers. These loans, however, have limits, which are set by the Federal Housing Finance Agency. While the limits can be higher in certain areas, most of the country is under the “base limit.” 

In Rhode Island, the entire state is under the base limits. This means that for a single-family home, you can borrow up to $647,200 and use a conforming loan. (Note that this is loan amount, not sale price.) For a two-unit property, you can borrow up to $828,700, while a three-unit property has a limit of $1,001,650. If you want to purchase a four-unit property, you can borrow up to $1,244,850 and still use a conforming loan. 

These are the limits for all five counties in Rhode Island, from Providence County in the north to Washington County in the south and even Newport and Bristol counties. 

These are the limits for conforming loans only. If you need a larger loan, there are other options, including jumbo loans in Rhode Island. 

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