Buying a home is an exciting time, and usually many questions pop up as to how the home process works. If you have questions on how the home buying process in Indiana works – you are not alone. The most popular Google searches related to home buying in Indiana are:
This blog post will answer these questions (and then some!)
Listed below are the steps to buying a home in Indiana and the rest of this article will explain these steps in detail.
When buying a home with financing, your first step in the home buying process is to get a home loan preapproval from a loan officer. A preapproval letter (or proof of funds if using cash) needs to be included in your offer to show that you have financial capacity to purchase the home. The preapproval letter will state how much of a loan you will be getting and also lists the loan term and interest rate. Note that depending on what type of lending institution you are getting a pre-approval from, the title of the Loan Officer may be different such as Mortgage Broker or if lending through a bank their title may be something like Vice President – Lending (or many other possible titles).
Our Preferred Vendors webpage has a list of our preferred lenders and instructions on how to get preapproved. The preapproval process generally consists of completing an online or over-the-phone application where you will be asked things like:
In Indiana the rule of thumb (with interest rates near 7% and 10% down) is that the payment will be about $700/month for every $100,000 borrowed (which includes PITI – principle, interest, taxes, and insurance). So, for a $200,000 home, the payment would be about $1,400/month. A $300,000 home would be about $2,100/month. A $400,000 home would be about $2,800/month. A $500,000 home would be about $3,500/month.
Conventional financing will allow up to 50% of your gross monthly income to go towards debt service. The best way to figure out how much of a loan you will qualify for is to see how this math is determined with an “easy math” example:
All the lenders I have listed on my Preferred Vendors page will have competitive interest rate quotes. The best way to check that you are getting the best interest rate is to reach out to them and ask for a rate quote. Note that your personal financial details do have a factor on what rate you are quoted, so expect to have to go through their preapproval process to be able to get a firm interest rate quote.
As of July 2024, Realtors © are now required to have Buyer Representation Agreements signed with their buyer clients before we are allowed to assist home buyers with their home search and purchase process. My YouTube video explains this in detail. This agreement is a 2 page agreement that authorizes me to represent you in your home purchase process.
A couple highlights of this agreement (aka the main questions buyers often have) are that this agreement is non-exclusive, and this agreement lists a compensation amount that the buyer agent will receive which the seller will be requested to pay in the offer we submit on a home (of which the seller typically pays.). Previous to the July 2024 legal change, the buyer-agent commission amount paid by the seller was written into the listing agreement with the listing agent, however the July 2024 legal changes made it illegal for listing agents to advertise buyer-agent commissions, so now the buyer agent commission is written into the purchase offer.
With your pre-approval in hand (or proof of funds if buying with cash) we are now ready to start touring homes! I will setup a tailored MLS home search that will collect all listed homes that meet your search criteria and you will receive an email each day that any new matching listings hit the market. In these emails there is also a link to your “Prospect Cart” which is like an Amazon shopping cart where all the matching homes are collected, and you can sort through the listings there.
To schedule showings for homes you want to tour – it’s a pretty simple process. You send me the homes you want to tour (via text, email, or a phone call) , and then I schedule the showings through an online portal called “ShowingTime”. In ShowingTime we can plan a “smart route” which will arrange the homes in a “shortest path” order.
Home tours usually go faster than what you would think. Once inside a home, a home tour usually takes about 10 minutes to tour inside the home and walk the property. When booking showings I plan to spend 15 minutes at each house. Of course if we are touring large homes or farms, property tours take longer.
My recommendation for home tours from years of helping buyers is that “the more the merrier.” Even if you aren’t 100% interested in a home, it could be helpful to tour the home so that you start to get a feel for what it is exactly what you are looking for. Showings generally go pretty quickly, so if we tour 4 homes, or 8 homes, we are only talking about an extra hour or hour and a half. I also find that when buyers walk through a number of homes that they start getting a better feel for what the housing stock is like in different areas, which can then help you home in on where you want to live.
I also find that sometimes home buyers may be concerned about not wanting to waste my time touring a home they know they aren’t going to buy, and although I appreciate that sentiment, I find its the best use of your and my time to walk through a number of homes because when doing so, it helps “the one” pop out to you when we finally do walk through the home that you want to buy.
Once we have toured homes and you have found the home you want to submit an offer on, the next step is to submit an offer.
An Indiana real estate offer is made of about 8 forms. These forms include:
When we submit an offer to purchase real estate, we have to show where the funds are going to come from to purchase the property. If you are using a home loan to purchase the property, then we would submit the loan pre-approval. If you are purchasing the property with cash, then a bank statement would usually be what we submit with the offer.
The Purchase Agreement that most people think of when you think of what gets filled out to submit an offer. The Purchase Agreement spells out all the terms and conditions of the purchase including: purchase price, closing date, appliances included, other items included in the sale, number of days to complete the inspection, closing date, and many other terms like that.
Any issues with the property that the sellers know about, the seller is legally required to disclose to the buyer before submitting an offer. This form lists all the various components of the home, and the seller has to mark for each component if the component is defective, not defective, or not applicable.
Any homes built before 1978 are required to have a lead based point disclosure. The seller fills out this form and is legally required to disclose if they have any knowledge of lead based paint being in the property. The disclosure generally has 2 boxes where a seller can check, one box states they do know of lead based paint being in the home, and the other box states that the seller does not have knowledge of lead based paint being in the home. If the seller knows of lead based paint being in the home, then the seller is required to provide any documentation of the lead based paint. (As an FYI on what to expect – these Lead Based Paint Disclosure forms almost always state that the seller has no knowledge of lead based paint being in the home.)
This form requests for the seller to pay the buyer broker commission. Prior to July 2024 this form was not needed as the MLS would state the commission amount the seller was paying the buyer broker. A legal change happened in July 2024 where the seller is no longer legally allowed to advertise the buyer agent commission being offered, and the second change was that this form has to be included for the seller to pay the buyer agent commission.
Affiliated Business Disclosure, Agency Office Policies, and Wiring Fraud Advisory Notice are the buyer brokerage forms we have at eXp Realty. Each brokerage will have slightly different versions of these forms, and may have additional forms than these forms. The Affiliated Business Disclosure form generally states that eXp Realty owns or has interest in other companies in the real estate space, the Agency Office Policies disclosure addresses the policies of eXp Realty, and the Wiring Fraud Advisory Notice points out that caution is needed when wiring funds and that wiring fraud is real and rampant (ask me about my crazy wiring fraud story.)
Earnest money is the buyer’s “skin in the game” to show the seller that the buyer is serious about their offer and is willing to put out money to secure their interest in the home. The Purchase Agreement will state how many days after acceptance of the offer the buyer has to submit the earnest money, which is usually 2 or 3 calendar days.
Either the listing agent’s brokerage, or the title company will hold the earnest money. Most all offices will accept earnest money payment in the form of a cashier’s check, some will accept a personal check, and most have an electronic payment option. We will find out the details of how the earnest money process works and send you an email with all those details.
The earnest money will count towards your down payment, or if the deal falls apart, then the earnest money gets returned to you. The only time you would not receive the earnest money returned is if you fall in breach of contract (which is pretty hard to do).
After the seller accepts your offer, we then turn out attention to the home inspection. The Purchase Agreement will state which date the “inspection response” is due. The Inspection Response is the form we submit to the listing agent that states which work we are requesting to have completed, and is usually due within 5-7 days after offer acceptance. There’s often a negotiation of inspection repairs, so sometimes you need to ask for a little more than what your bottom line requests are, so there’s some strategy we will talk through at that time.
I find that most home buyers generally think that when you call an inspector to complete a home inspection, that the inspector inspects everything that you would want them to inspect, after all, they are the experts, right? This was my understanding also when we bought our first house. Unfortunately, I was wrong about that, and things I thought would be inspected were not inspected. When you call an inspector to schedule an inspection, that generally means that they are inspecting the house structure and components inside and out, which is great, but there may be other things you want (or ned) them to inspect. The main types of inspections are:
Once you have decided which types of inspections you want to have completed, you then schedule the inspections. Our Preferred Vendors page lists inspectors that we have had positive experiences with. Inspectors can be booked out for some time, so as soon as the seller accepts your offer you will want to get the inspections scheduled as soon as possible.
About half of our Clients attend the home inspection and about half of our Clients do not attend the home inspection. You do not have to attend the inspection, but we find that attending the inspection will help you learn a lot about your new home. Personally, I would attend the inspection to get better educated on your new home, and the inspectors often have tips and trips about home ownership and maintenance that are helpful to learn.
About half of our Clients attend the home inspection and about half of our Clients do not attend the home inspection. You do not have to attend the inspection, but we find that attending the inspection will help you learn a lot about your new home. Personally, I would attend the inspection to get better educated on your new home, and the Inspectors often have tips and trips about home ownership and maintenance that are helpful to learn. But, if you can’t make it to the inspection, that’s no big deal – the inspector will send a detailed inspection report that lists every comment they identified, and also includes a summary section that lists the big picture findings.
After the inspector sends out the inspection report we will have a call to discuss the report and determine which repairs we will request. Some home buyers have the misunderstanding that we simply take the inspection report and give it to the seller and tell the seller that we want them to repair everything in the inspection report, but that’s not how the process works.
The inspection report will contain many comments that aren’t needing repairs, such as the inspector may include a copy of picture of the roof and state that the roof appears to have about 5 years of life left – that comments is just for your knowledge, and the seller wouldn’t be responsible to provide a new roof just because there is 5 years of life left on the roof. The home inspection process is supposed to be limited to the safety and functionality of the home, so things like nicks in the wall, or dirty windows is really beyond the scope of what the inspection is for.
Common items that are in the scope of what the seller would be responsible to repair are electrical outlets not wired properly, dripping faucets, furnaces or air conditioners not working properly, windows that do not open or close properly, appliances not working properly, and many other items.
To provide our inspection response we use a standard form titled “Buyer’s Inspection Response” that lists the repairs we are requesting, and the buyer will digitally sign the form before I submit the Inspection Response to the seller.
Once we have our list of repairs we want the seller to complete, we will discuss strategy of the repair requests. Much like the process of submitting an offer on a home where it becomes a negotiation, a similar negotiation process often unfolds during the inspection process. From a negotiation standpoint, we would often want to request a little more repairs than what our bottom line repair requests are, as the seller will often push back against some of the repair requests. Or what often happens is that in lieu of the seller having all or some of the repairs completed, that the seller will offer a credit to the buyer so that the buyer can have the repairs completed after closing. A seller credit is often a great solution so that you as the buyer can confirm the work is completed to your satisfaction.
Note that if you are using USDA, FHA, or VA financing, those agencies will also complete their own inspection and will provide non-negotiable repair demands. So, with these financing types there are essentially 2 separate inspection processes.
The seller will then review our Inspection Response, and draft a Seller’s Response to Buyers Inspection Response and send that back to me. The seller’s response could either be: 1) acceptance of our repair requests, 2) rejection of our repair requests and request cancellation of the contract, or 3) a counter offer that proposes a negotiated scope of repairs.
This back-and-forth continues until agreement is reached. If agreement cannot be reached, then a “mutual release” will be circulated for both the buyer and seller to sign to cancel the contract.
Now that the buyer and seller have agreed to the scope of repairs, the seller is responsible for having the repairs completed. The seller is requested to provide receipts and photos of work completed by contractors. At the final walk through (which usually happens the day before or the day of closing), we will check to make sure all the repairs are completed. If the repairs are not completed and it is too close to closing to have time for the remaining repairs to be completed, then the seller can be requested to provide a credit to the buyer to cover the cost of the remaining repairs, or the closing can be pushed back to allow time for the repairs to be completed.
An appraisal is when a licensed appraiser visits the home and provides a professional opinion of the value of the home. The appraiser will produce an Appraisal Report that shows in detail how the value of the home was determined.
An appraisal is required by lenders with the purpose of confirming that the value of the home equals or exceeds the purchase price. Lenders usually wait until the inspection negotiations are complete before ordering the appraisal because the appraisal does have a cost that the buyer will usually pay at the time the appraisal is ordered. The reason the appraisal is ordered after the inspection repair negotiations are complete is because sometimes the buyer and seller do not agree on inspection repairs and the deal falls apart – if the deal falls apart after the appraisal was ordered and paid for then that appraisal money is lost as it is non-refundable.
If the appraisal supports the purchase price, then the home sale process continues on. If the appraisal value is less than the contract price, then the seller may need to agree to lower the contract price to the appraisal price, or the buyer may need to increase the down payment amount because the lenders need to have an equity position in the home. For example, if a contract value is $100,000, and the buyer is putting down 10%, then the loan would be $90,000. If the appraisal comes in at $80,000, then the loan amount would be higher than the appraisal amount of which the lender would not have any equity in the home.
The financing underwriting process starts right after the purchase agreement is signed by the buyer and seller. The underwriting process generally consists of the lender’s “underwriting department” reviewing all of your latest financing information which includes: latest pay checks, latest bank statements, contacting the buyers’ employers for verification of employment, and other related checks. This process will be a little bit different depending on the details of the property sale and depending on the details of your financial details (for example – self employed buyers will usually have to generate a year-to-date P&L.)
The moment in financing we are all waiting on to be able to schedule the closing is receiving the “Clear To Close” (CTC) from the lender. The lender issues the CTC when all their due diligence and checklists are complete and after they have received the appraisal. Once the CTC is issued then the buyers agent and the listing agent will confer with their buyer and seller to coordinate a closing date and time that works for all parties. The title company will be advised of this date and time and the title company will send out a “closing confirmation” to confirm that the closing has been scheduled.
The lender and the real estate agents provide the title company all the financial details of the property sale. The title company compiles all this information and provides a “preliminary settlement statement” which shows all the financial debits and credits. This preliminary settlement statement is sent out to the lender, Realtors, buyer, and seller for everyone to review. At closing the finalized settlement statement is provided.
A handful of pre-closing steps get triggered by the lender issuing the Clear to Close and the closing being scheduled.
When the title company sends out the preliminary settlement statement there will be an amount listed called the “buyers cash to close” (and has a few other names), which is the cash amount the buyer needs to bring to the title company for closing. In Indiana, any amount over $10,000 needs to be wired to the title company. To wire funds you contact the title company to request their wiring instructions which will be their bank name, address, routing number, and account number – you then take this information to your bank and direct them to wire the funds to the title company. The title company then holds these funds in their escrow account, then at closing these funds will be used for the closing.
Prior to closing the buyer is entitled to walk through the home before closing to confirm that the home is in the same condition it was when the buyer toured the home. If there were no major repairs needed from the inspection process, then this final walkthrough usually happens right before closing. If there were significant repairs needed then it is good to do a walkthrough prior to the final walkthrough to confirm that all the repairs were completed.
NIPSCO (which is the gas and electric supplier for northwest Indiana) – Once the closing date and time is known, then the buyer can reach out to the utility company NIPSCO for the gas and electric to be transferred into the buyer’s names. The seller is responsible to keep utilities on through the day of closing, so when contacting NIPSCO to have the utilities transferred to the buyer you would tell them the date of the closing and have utilities scheduled to be moved into the buyer’s account for the day after closing.
Municipal water and sewer (which usually also means garbage also) – Once the closing date and time is known, then the buyer can reach out to the municipality (eg the Town of Dyer) for the water account to be transferred into the buyer’s name. The seller is responsible to keep the water account on through the day of closing, so when contacting the municipality to have the water account transferred to the buyer’s name you would tell them the date of the closing and have the water account scheduled to be moved into the buyer’s account for the day after closing. (Note on jargon – when talking about the “water account”, the water account also includes the sewer account and also usually the garbage account – so, when you contact the municipality, all you have to say is that you are buying a home and need to put the water account into your name for the day after closing.)
Now the exciting day of closing day is here! When closing day has arrived that means all the hard work is completed and there is not much to do on closing day other than attend the closing.
All a buyer needs to bring to closing is a state ID and any funds that have not been wired already.
As a buyer, most of what you will be doing at closing is signing lots of paperwork. The “Escrow Agent” is the title company staff person that facilitates the closing. The escrow agent will guide you through what paperwork to sign and explain what each document is. There are two sets of documents to sign which are the loan paperwork and the title paperwork. The majority of the paperwork to sign is paperwork for the home loan. When buying with cash there is only the title paperwork to sign which is a small amount of documents.
A closing usually takes 30 minutes to an hour. Most of that time is spent waiting for the lender to review the lending paperwork and authorize funding. The closing will start with the escrow agent having the buyer sign all the lending paperwork and then the escrow agent will scan the lending paperwork to the lender for review. Then while we are waiting for the lender to review the lending paperwork the escrow agent will have the buyer and seller sign the title paperwork. Once the lender authorizes funding, then the escrow agent cuts all the checks and completes the needed wires for funds to be disbursed. The buyer will receive the deed to the property and the title company will have the deed recorded at the county recorder’s office along with the mortgage note.
Now that you are the proud owner of your new home, there’s some remaining tasks to take care of to have a smooth transition from your previous home to your new home.
Now that you are the proud owner of your new home, there’s some remaining tasks to take care of to have a smooth transition from your previous home to your new home.
I hope this step-by-step guide to buying a home in Indiana was helpful to you! Please don’t hesitate to reach out with any questions.
I’d love to help with your property buying or selling journey.
Give me a call/text on my cell at (708) 608-3000!
Tony Anczer
Northwest Indiana & Illinois Realtor
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