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Buying a Home: The Legal Steps to Remember

  • Buying a home requires research into credit scores, down payments, and loan documents.
  • Ownership documents, such as deeds, bills of sale, and home inspection reports, are essential to review.
  • Potential buyers must know closing costs and prepaid items such as insurance premiums.
  • An experienced lawyer must understand legal terms before signing any contracts.

Buying a home is one of the most significant investments people make in their lifetime, and for a good reason. Owning a home provides stability and security for families and financial benefits. According to the National Association of Realtors (NAR), homeowners gain an average of $9,400 in equity annually. That translates to an average of $229 each month.

Aside from financial benefits, there are many other reasons why people choose to buy homes. Homeownership gives people more control over their living space and allows them to customize it according to their preferences. Families also benefit from owning a home that will appreciate over time, which creates long-term wealth opportunities through rental income or sale profits. People also find comfort in knowing they have stability and won’t be moved if prices increase or another renter moves into the area.

Research conducted by NAR found that 92% of respondents felt homeownership was part of achieving “the American Dream.” Additionally, 69% believed owning a home was safer than stocks or bonds. Finally, 64% said they felt more satisfied with life after purchasing their first home. These statistics demonstrate the importance of homeownership in realizing personal goals and creating a better quality of life for individuals and families alike.

However, buying a home involves many legal steps that must be considered. Here’s a quick rundown of what potential homebuyers should consider:

Loan-Related Documents

Mortgage application form

Buying a home requires financial security, and securing a loan for a house payment is the most common way. A mortgage loan is an installment loan that allows potential homeowners to purchase the property by making monthly payments over an extended period. Taking out a mortgage loan is one of the most important legal steps to remember when buying a home.

Before applying for a loan, it’s essential for potential buyers to assess their credit score, as this will determine whether they qualify. Most lenders require that borrowers have at least good credit—typically in the 620-650 range—to be approved. It’s also prudent to calculate what kind of down payment can be made on the purchase and how much can be borrowed. To receive pre-approval, prospective buyers usually need proof of income and employment status and documentation such as bank statements, W2 forms, or tax returns.

Once pre-approved, the borrower must review all documents thoroughly and understand their legal obligations before signing any contracts. Homebuyers should read through each document carefully to know what fees and terms are included in the loan agreement. The Federal Trade Commission (FTC) recommends that consumers verify all interest rates and closing costs before signing any paperwork. It’s also crucial for buyers to familiarize themselves with applicable state and federal laws regarding mortgages to be aware of what protections are available in case of default or foreclosure.

Real Estate Ownership Documents

Deed of sale for home purchase

Homebuyers must understand what type of ownership they obtain when purchasing a property. Usually, this means that the buyer will become an owner of the entire home and any land it is on, or in a condo complex, buyers can purchase ownership of just their unit. Individuals typically buy real estate and personal property together for single-family homes as one transaction.

Here are a few of the documents homebuyers may expect to review while purchasing a property:


The original document recording the transfer of ownership from one person or entity to another serves as proof that the seller has given the buyer legal title. Usually, the deed is filed with the local or county clerk after the sale.

Bill of Sale

The bill of sale is a document that records the transfer of personal property, such as appliances and furniture, from the seller to the buyer.

Home Inspection Report

Before purchasing a property, inspecting it with a certified inspector is wise. An inspection report provides details about the condition of certain parts of the home, like electrical wiring and plumbing systems. This helps buyers make an informed decision about their purchase.

Title Search

A title search verifies that there are no liens or other claims on the property that could prevent its sale. A qualified title company thoroughly checks these legal issues before closing on a home purchase.

Getting an experienced lawyer to review the documents before signing will be vital. They can explain any legal terms and advise buyers on their best interests.

Closing Responsibilities

Closing a home purchase occurs when all documents are signed and exchanged. The buyer will usually be responsible for two fees: closing costs and prepaid items. Closing costs include title fees, real estate taxes, lender’s fees, and other costs associated with the transaction. Prepaid items are things like homeowners insurance premiums, property tax escrow accounts, and interest on the loan up to the date of closing.

Final Thoughts

These are just some of the many legal steps homebuyers must consider while purchasing a home. It’s essential to research and ensure you understand all applicable laws before signing any documents or agreements. These steps can help ensure a smooth transaction—and a great new place to call home!

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