When in the biggest housing boom in history, it can be easy to get excited about the prospect of buying a new home. However, it's important to understand the reality of the process and just how extensive the closing process of actually buying a home can be. A little bit of preparation can go a long way when it comes to wrapping up your home sale.
Here's everything you have to know for getting ready for the closing.
Preparing For Your Closing
Simply preparing for closing can help speed up the process of finalizing the sale or purchase of a home. As a buyer, it's important to get all of the documents you need beforehand. Calling your loan officer can clear things up and help you to get everything you need together.
Large cash deposits can upset the balance of your closing. If they are made, ensure that you document them properly. If you're considering opening a new credit card account, do so either long before the closing or wait until after.
Buyers need to make sure that nothing major changes in their finances until after the closing. Last-minute checks of vital information are fairly common when going through a home closing. If you make any major changes to your financial situation, they will appear when your loan officer looks at your account.
Who Is at a Closing?
Closing procedures will vary between states or even within a state, and could vary between different counties. However, there are a number of parties that will be at most every closing in any county or state.
Expect a closing agent to be there. They will work for the lender or the title company. There will also be an attorney present brought in with the closing agent or who might also be the actual closing agent.
Both sides should have attorneys so whether you're buying or selling, make sure you have an attorney at the closing table.
If there's a title being exchanged, there will be a representative from the title company. They'll provide some kind of written evidence of who owns the property both before the closing and after.
The home seller and mortgagor will both be there as well as the seller's real estate agent, and the lender or mortgagee will be present.
Some of these roles can be performed by the same person, so it might not be as many people as this list might have you thinking.
The Day of Closing
The day that you close can be an exciting entry on your calendar, but the process of selling or buying a home can feel arduous and slow. When you finally reach the day of selling, there's a lot to celebrate.
However, you need to be properly prepared for what's to come on that day. Buyers are expected to make a final walk through with realtors in order to confirm that the home is in the condition that they required. Before the closing day, there's typically a back and forth negotiation to ensure that any repairs are made and that the home is in a condition ready for the buyer to move in.
During the closing, there are a few documents you'll have to fill out.
First, you'll need a deed of trust or mortgage, which is the document putting a lien on the property as collateral for the buyer's loan. Then, there's a promissory note which is the buyer's agreement to pay the lender or the seller depending on the situation.
Additionally, there's a closing disclosure. This itemized list lays out the final credits and charges that are to be covered by either party. In some cases, the seller is expected to pay taxes and closing costs while in others, that's all up to the buyer.
After this is all wrapped up, keys will exchange hands and the sale will be finalized.
The Major Closing Documents
The buyer will receive a number of documents on the day of the closing. These will give the buyer an understanding of what their new assets are and how they'll be paid off over time.
The loan estimate is a document with information about terms surrounding the loan. This information has to be correct, down to the spelling of your name, or else someone else could take ownership or be responsible for your loan.
The closing disclosure is going to give details of the mortgage around three days before the closing. This allows buyers to compare what's on the loan estimate versus the closing disclosure.
Your initial escrow statement will outline any payments that the lender is expected to pay from their escrow account during the first year. The mortgage note is a simple promise to pay the mortgage. The actual mortgage is the lender's claim against the home.
There's also a certificate of occupancy. A newly constructed home is going to require one of these before you can move in. With all of the laws and legal restrictions around building, zoning, and dwelling in new homes, it's vital to have documentation to account for this.
The Closing Process Doesn't Have to Be Stressful
The closing process of your home purchase can feel daunting and even expensive if you're not prepared. It's vital that you outline the potential costs before deciding on a home because you could easily step outside of your budget with closing costs. The process is simple when you have a trained realtor in your corner to help with your purchase.
If you're ready to have a hard conversation about your budget, check out our guide for tips.