Key Takeaways
- A signed purchase agreement is legally binding — understand every contingency before you sign.
- Earnest money is held in escrow and typically applied toward your down payment at closing.
- The inspection period is your primary window to negotiate repairs or walk away without penalty.
- Mortgage underwriting can take two to four weeks; avoid major financial changes during this period.
- Closing costs typically run 2–5% of the loan amount and are due at the closing table.
- A final walk-through, usually 24 hours before closing, lets you confirm the property's condition.
Making an Offer
Once you've found a home you want to buy, the first formal step is submitting a written offer. Your offer isn't just a price — it's a package that includes your proposed purchase price, requested closing date, contingencies, and any personal property (appliances, fixtures) you want included in the sale.
In competitive markets, buyers sometimes include an escalation clause — a provision that automatically raises your bid by a set increment above competing offers, up to a stated maximum. Your real estate agent can advise whether this tactic fits the market conditions you're facing.
If you haven't already done so, now is the time to review what first-time buyers often overlook before locking in on a price.
Get pre-approved — not just pre-qualified — before making any offer. Pre-approval involves a full credit check and income verification, which makes sellers take your bid far more seriously.
Sellers in competitive markets routinely prioritize offers accompanied by pre-approval letters because they signal a buyer with verified financing capacity, reducing the risk of a deal falling through.
Attend your home inspection in person if at all possible. Walking through with the inspector lets you ask questions on the spot and understand which findings are serious versus routine maintenance items.
A written report alone can be hard to interpret. Direct conversation with the inspector gives buyers context that helps them negotiate more precisely and make a more confident go/no-go decision.
The Purchase Agreement
When a seller accepts your offer, both parties sign a purchase agreement (also called a sales contract or purchase and sale agreement). This is a legally binding document that spells out exactly what is being sold, for how much, and under what conditions.
Key elements include the purchase price, earnest money amount, financing terms, contingencies (inspection, appraisal, financing), and the closing date. Read every line carefully — once signed, your options to exit without penalty are largely limited to the contingencies written into the contract.
Read Every Contingency Before You Sign
A purchase agreement is a legally binding contract. Contingencies are the clauses that protect your right to exit the deal and recover your earnest money under specific circumstances — without them, you may be on the hook financially. Never waive a contingency without fully understanding what you're giving up and consulting your agent or attorney.
Earnest Money and Escrow
Earnest money is a good-faith deposit — typically 1–3% of the purchase price — that demonstrates you're a serious buyer. It's paid shortly after the purchase agreement is signed and held by a neutral third party in an escrow account until closing.
If the sale closes, the earnest money is credited toward your down payment or closing costs. If you back out for a reason not protected by a contingency, you may forfeit it. If the seller backs out or a contingency isn't met, the funds are generally returned to you.
2–3%
Typical earnest money deposit range
Industry practice varies by region and market conditions; some competitive markets see higher deposits.
30–60 days
Average time from offer to closing
The National Association of Realtors has historically reported median closing timelines in the 30–60 day range, depending on financing type and local market.
2–5%
Typical closing costs as share of loan
According to the Consumer Financial Protection Bureau, closing costs commonly fall in this range but vary by lender, location, and loan type.
Inspections and Contingencies
A home inspection contingency gives you the right to hire a licensed inspector to evaluate the property's condition — foundation, roof, plumbing, electrical, HVAC, and more — before the sale proceeds. Most inspection periods last 7–14 days from the contract signing date.
After reviewing the inspector's report, you can: accept the property as-is, request repairs or a price reduction, or in some cases, walk away and recover your earnest money. This is the most important leverage window in the entire process — use it deliberately.
Other common contingencies include a financing contingency (protecting you if your mortgage falls through) and an appraisal contingency (protecting you if the home appraises below the purchase price). Waiving contingencies can make your offer more competitive but significantly raises your financial risk.
Appraisal and Mortgage Underwriting
Your lender will order an independent appraisal — a professional assessment of the home's market value. If the appraisal comes in below the purchase price and you have an appraisal contingency, you can renegotiate with the seller, make up the difference in cash, or exit the contract.
Simultaneously, your loan goes through underwriting — the lender's formal process of verifying your income, assets, credit history, and the property itself before committing to the mortgage. Underwriters may request additional documentation (called conditions), so respond to requests promptly to avoid delays.
Important: During underwriting, avoid opening new credit accounts, making large purchases, changing jobs, or moving money between accounts without documentation. Any of these can raise red flags and slow or derail your approval.
For detailed explanations of the documents you'll encounter during this stage, see our plain-language glossary of closing terms.
Closing Day: What to Expect
Closing — sometimes called settlement — is the final step, where ownership officially transfers from the seller to you. You'll typically receive a Closing Disclosure at least three business days before closing. Review it carefully against your earlier Loan Estimate to catch any unexpected fee changes.
At the closing table, you'll sign a significant stack of documents: the mortgage note, deed of trust, closing disclosure, and others. You'll also pay your closing costs — which typically range from 2–5% of the loan amount — and your remaining down payment, usually via certified check or wire transfer.
Before closing day, conduct a final walk-through of the property (typically 24 hours prior) to confirm it's in the agreed-upon condition and that any negotiated repairs were completed. Once all documents are signed and funds are disbursed, the deed is recorded with the local government and the home is yours.
This article provides general educational information about the home purchase process and is not legal, financial, or real estate advice. Contract terms, timelines, and legal requirements vary by state and transaction. Consult a licensed real estate agent, attorney, or other qualified professional for guidance specific to your situation.
Closing Timelines Vary by Loan Type
Conventional loans, FHA loans, and VA loans each have different processing requirements, which can affect how long underwriting takes. VA and FHA loans often require additional property condition checks (called minimum property requirements) that can extend the timeline. Ask your lender for a realistic estimate early in the process so you can set expectations with the seller.