Congratulations on taking the steps towards becoming a homeowner. Homeownership makes for stronger communities and more stable households and is an integral part of the American Dream. We love working with buyers to help them find and buy homes they love and that journey often starts here. We made this guide to buying a house in Rhode Island to help you see the scope of the process and make you as prepared as possible to successfully buy a home you'll love. This is an overview of the components of the home buying process. You will have questions and we will gladly answer any of them. Don’t hesitate to reach out to us when you do.
There are several components to purchasing a home, but the single biggest factor with the entire process is your financial situation. Income, savings, available credit, debt to credit ratio, debt to income ratio, and current interest rates will all impact how much home you can comfortably afford to buy. The first step in figuring this all out is to chat with a lender about loan options, available mortgage terms, go over your specific financial situation, and determine what programs you are eligible for. Be sure to go over what your monthly payment will look like under those terms at varying purchase prices and down payment options. The lender will need to pull your credit and will need details about your income and available savings to be used for the purchase process towards down payment and closing costs, and other out of pocket expenses.
Once the lender has had a chance to gather your information together and has gone over options, they will provide a pre-approval letter. This is necessary to have before we start searching for properties as you need a pre-approval letter to make an offer on a house and the last thing you want is to be scrambling for a pre-approval after you’ve found a house you think you love. The market moves too fast today for buyers to wait until after they’ve found a house to go through the Financial Preparation process.
Once you have your pre-approval in place and know what your functional/comfortable price range is, then it is time to start the home search process. Your Realtor will be able to set up detailed searches for homes that meet your preferred criteria. Number of beds and baths, overall square footage, location, type of home, garage/parking spaces, lot size, and nearby amenities are the most common criteria home buyers like to use when searching for a home to buy. Using more criteria and making a more detailed search can all help narrow down search results to locate houses on the market that might work for your needs and your budget. Many Realtors prefer to handle the search process through their local MLS alone, and they usually have many tools that help with the search process, but we tend to encourage our clients to continue looking for houses wherever the search is comfortable for them. If you like searching on Zillow or Redfin, or Realtor.com, keep looking on those sites and if you see something you like, send it to your Realtor right away and let them know when you are available to see it.
Most properties require a minimum 24 hour notice to schedule, but sometimes showings can be accommodated on shorter notice. It never hurts to ask, but temper your expectations. It may take a few days to coordinate a showing between your agent, the listing agent, and occupants living in the property.
Do attend open houses that are available. When you do, advise the agent showing the house that you have a Realtor that you are working with and if you like the property notify your Realtor immediately so that they can get to work on preparing an offer for you.
Avoid talking directly to agents that represent the seller of a property. Let your Realtor handle those inquiries. The listing agent represents the seller and are obligated to use any information you give them to the seller’s advantage if they can, and you may not even know you gave them any info to use against you.
So, we have talked to a lender and gotten a pre-approval and have found a house we love and want to prepare an offer. In Rhode Island, it is always most prudent to present your offer on a Purchase and Sales Agreement, complete with signed seller property and lead disclosures, including a copy of the pre-approval letter from your lender and if possible an image of the deposit check made out to the listing broker. The Purchase and Sales Agreement covers all the details and terms of the transaction in 5-6 pages where an offer sheet will attempt to cover those same terms in 1 page. It is best to present as clear and detailed an offer as possible to avoid misunderstandings that can cost time, money, and hurt the negotiation process in a way that was otherwise avoidable.
The first items on the contract are the purchase price and down payment amount. Your Realtor will be able to help you determine a fair market value for the property and general market conditions such as competition and available inventory that might impact the offer. A customary deposit in RI is 5% of the purchase price if the buyer’s financing includes a down payment amount of 5% or more.
There are some special financing situations that require less than a 5% down payment and often we can get a seller to accept a lower deposit, but keep in mind that a full price offer that is only offering a $1000 deposit doesn’t give the seller a lot of assurance that you'll stick with the deal and doesn't leave a lot to cover added costs associated with re-listing if you walk away. Providing the largest deposit you can will make your offer strong.
The typical contract offers 2 standard buyer contingencies. There is the inspection contingency, which is inherent to the sales agreement unless actively waived by the buyer. Standard in RI the buyer has 10 days from the date of the final signature on the contract, excluding weekends and holidays, to hold inspections, get reports back, and make requests for repairs or credits or withdraw if they found something that makes them uncomfortable moving forward with the purchase. The buyer’s deposit is protected in this case, and the buyer can withdraw without default.
There is a also a mortgage contingency in the contract. This can be waived in the event the buyer is paying cash or financing through a third party via a hard money loan or an equity loan on an existing piece of property. The mortgage contingency sets a date, typically about 2 weeks prior to the contract closing date, by which to lender must provide you with a mortgage approval letter or we need to extend the contingency or withdraw if we are unable to get approved for financing prior to the commitment date. Failure to meet the mortgage commitment is not a default and the buyer would be subject to receive full refund of deposit upon presentation of a denial letter from the lender.
The seller may accept your offer, reject your offer or counter back with a price and/or terms that they consider acceptable. It is up to you and your agent to determine what your line is and what you’re willing to go to in order to purchase the house.
Congratulations! You have had your offer accepted, now we have to get to work.
Once your offer is accepted, we need to:
- Submit deposit to listing brokerage
- Schedule home inspection (remember we only have 10 days to have our inspections)
- Apply for the mortgage
- Select a closing attorney
- Start shopping for homeowner’s insurance
Your typical home inspection will cost between $400 - $1000 for a single family home. Once we have had the inspections, depending on the outcome, we may have another negotiating situation to get things fixed that were not disclosed as deficient.
It is best to avoid submitting payment to your lender for the appraisal until negotiation of repairs is completed. You can expect a typical appraisal to cost between $400 - $600. This is required by your lender but the buyer pays for the appraisal.
Once the inspection process is completed and we have gotten our mortgage commitment, we are in the home stretch. The lender may ask for more documents (often times requestings items you have already provided, a good practice is to keep copies of everything you send to your lender). You will need to provide your home insurance rider to the lender. You should coordinate with seller regarding transfer of utilities into your name to correspond to the target closing date, confirm a schedule time with the closing attorney, and about 3-4 days prior to closing the lender should provide you with a final estimate on closing costs and cash required to bring to closing.
Buyer’s funds to closing can typically be provided via a bank or cashier’s check or wire-transfer depending on your bank and the closing attorney. You will need the cash to close and a valid photo id to complete the transaction.
There should be a final walk-through of the property the morning of or night before the closing. Any issues with personal property left or damage/maintenance issues need to be resolved before the closing is completed.
After the closing, the closing attorney records the transaction with the city/town and the house is yours. If the closing occurs later in the day, you may not be able to take occupancy of the property until the next day after the attorney has filed with the town.
Now you own your own house and it is time for you to make it your home. We hope you found this Guide to Buying a House in Rhode Island.
We would LOVE to help you reach your dream of home ownership. Don't hesitate to reach out if you have any questions or if we can help in any way.
We’ll listen, it’s always confidential, and we’ll work with you!