Among the most important stages of buying a home is the closing process, which is the final step that needs to be completed before you’re able to move into your new home. The closing process can last for around 30-60 days, the exact duration of which depends on the agreement between the buyer and seller as well as the length of time it takes to complete the underwriting process. The closing date that you set is when the home will legally become yours.
On the closing date, you will be tasked with signing some documents, after which you will receive the keys to your home as well as documentation that proves your ownership of the property. Keep in mind that any closing costs will also be paid on the date of closing. Some additional expenses that you may need to cover during closing include insurance, taxes, prepaid interest, and the down payment that you agreed to. The lender will then distribute the funds to the seller as well as any other parties involved with the transaction. Only the buyer and seller are required to attend the closing. However, some buyers and sellers will request that their agents attend the closing as well.
Before you close with the seller, it’s highly recommended that you identify what your financial priorities will be. Do you prefer lower closing costs or better cash flow? In the event that the closing date is scheduled for a day that’s later in the month, you won’t pay as much interest once the closing date rolls around. On the other hand, closing early in the month will give you an extended period of time to save up before you need to make your initial mortgage payment. While the majority of closings take at least 30 days to be completed, the seller may also request a specific date that could be anywhere from 45-60 days after your offer has been accepted.
Keep in mind that there are also several problems that could cause delays during the closing process. For instance, the appraisal could come in at a lower amount than expected. It’s also possible that there could be an issue with your loan or that the home inspection could identify problems that need to be corrected. However, these problems don’t usually cause lengthy delays.
Before you purchase a home, it’s important to understand that there are several methods you can use to pay for your new home. The most common option involves applying for a loan with a bank or similar financial institution. There are numerous loan options available to you, which include everything from conventional loans to government-backed loans like VA loans or FHA loans. You could also pay for the home with cash if you have enough capital to cover the entire cost of the property. This article goes in depth about what the closing process entails.
How to Prepare for Your Closing Date
While many aspects of the closing process will be handled for you, there are still several things that you need to do to prepare for your closing date, the primary of which is to gather a team of professionals who will need to be involved in this process. The team members your real estate agent will work alongside include:
- Escrow officer – This individual is responsible for monitoring escrow accounts and for transferring funds to the necessary parties on the day of the closing
- Mortgage professional – These professionals work on behalf of the buyer to find the right loans with the best terms and interest rates
- Home inspector – A home inspector will perform the requisite inspection of the property to determine if any issues need to be corrected before the sale of the property can be completed
- Attorney – An attorney is typically on hand during the closing process to resolve any issues that arise
- Title insurance agent – A title insurance agent is someone who protects the lender and buyer in the event that claims are made by other individuals pertaining to ownership of the property that you’ve made an offer on
Closing Checklist
Once you have gathered a team of experts to help you with the closing process, they will be able to assist you in reviewing the contract that you’ve signed and preparing for any closing contingencies that might occur. These contingencies are specific conditions that must be met before you can legally own the home. Make sure to discuss the different aspects of the closing process with your team, which are detailed in the following.
Discuss Home Inspection
One of the more important components of the closing process is the home inspection that takes place around 1-2 weeks after the process begins. A professional home inspector will perform an extensive inspection of the home to determine if there are any problem areas that need to be addressed before the sale can go through. For instance, the HVAC unit may be about to malfunction because of its age, which the owner of the home might need to address. Any structural issues with the home will be denoted by the inspector.
As the buyer, you will have the ability to either accept the home as it is or request that the owner makes repairs before the home can be closed on. It’s also possible that the seller will reduce the price or pay some of your closing costs, which will allow you to use the money you save to make the necessary repairs. A home inspection helps to protect you from any surprises when you finally have ownership of the home.
Discuss Appraisal
The appraisal is a process that determines the value of the home that you’re about to buy. It’s important for an appraisal to take place so that the lender can be certain that they aren’t loaning you more money than the home is worth. The fee for the appraisal is included in the closing costs that you pay on the closing date.
Discuss Loans and If That May Be the Right Option for You
While you likely received pre-approval for a loan before making an offer on a home, there are still some steps that you must go through during the closing process. Keep in mind that there are a range of different loan options available to you, which include conventional loans that can have terms between 15-30 years, FHA loans, VA loans, and USDA loans. The type that you choose depends on which ones you would qualify for. Keep in mind that a loan is necessary unless you’re able to pay for the property solely with cash.
When you send in your application for a loan, it’s important that you provide the lender with all of the documentation that’s needed for the application to be approved. The necessary documentation includes your identification, asset statements, insurance information, a copy of your contract, and income statements. Bankruptcy papers and a divorce decree will also need to be produced if they apply to your situation.
Discuss Homeowners Insurance
Any buyer of a home is required to purchase homeowners insurance before the sale can be closed. This insurance covers the total cost to replace, repair, or rebuild the property as well as any items in your home if ever they become damaged. Most policies also provide liability coverage that protects you against accidents that can occur on your property. The monthly premiums for this insurance policy will be included within your mortgage payment. If you want to obtain insurance at a low cost, it’s recommended that you speak with an insurance agent before making a final decision.
Final Walkthrough
Within 24 hours of the closing, a final walkthrough will occur, which allows you to take one final look at your new home before the closing date arrives. When the final walkthrough occurs, the seller’s possessions should be entirely cleared out, which will give you a great look at the property. Consider taking your contract with you to make certain that the condition of the home matches what was written on the contract. During the walkthrough, it’s important that you test all light fixtures, appliances, doors, toilets, and windows, which ensures that everything is in working condition before the sale of the home is fully processed.
Factors to Consider When Closing
When you’re closing on the purchase of a new home, there are several factors that you should consider. For instance, you may want to purchase title insurance for your lender and yourself. A title is a kind of legal documentation that includes all of the details pertaining to the owner of the property. If there’s a lien on a property, the lien will be stated on the title. While a title officer can make sure that any lien or similar issue is resolved before the closing is completed, purchasing title insurance is a great way to guarantee that you’re provided with a clean title.
Keep in mind that the mortgage company may need more time to finalize the closing process, which means that the closing date could be extended. Problems can occur if there’s an issue with the documentation that you provide to the lender or if you’re seeking loan terms that aren’t ideal. For instance, it may be easier for you to be approved for a 30-year loan term when compared to a 15-year term.
The closing process is as long as it is because the loan needs to be underwritten. The average time it takes to obtain a loan is around 41 days. However, the closing process can take anywhere from 30-60 days to be completed. Make sure that you discuss moving times with the seller. As the buyer, you might be able to move into your new home immediately after the conclusion of the closing appointment. However, the seller could ask to stay in the home for a couple of days while they move their belongings. This request needs to be made by the seller well in advance of the closing date.
Once you move into your new home, you may notice that the seller hasn’t had the home cleaned properly. On the other hand, many sellers will pay for a professional cleaning before the closing to ensure that you’re moving into a clean home. If the seller doesn’t pay for this service, professional cleaning services typically cost around $90-$150 per hour. After the home has been cleaned, you can enjoy the fruits of your investment now that you’re officially the owner of a new home.