Closing Date: What Home Buyers Can Expect?
Congratulations! You made it! Buying a home is a long and tedious process, but if you are coming up on closing day, you are almost there. However, the deal is not in the bag yet – closing day may have unpleasant surprises. Let’s talk about everything you can expect on closing day and how to make this day go off without a hitch.
Real Estate Closing Scheduling
If your offer has already been accepted, then you already have a closing date set. However, if you are reading this before you have agreed on a contract with the sellers, consider scheduling your closing day earlier than the last day of the month. Everyone tends to schedule closing for the last day of the month, and in general it is best to schedule closing towards the end of the month, to reduce pro-rated costs. However scheduling on the last day of the month doesn’t give you any flexibility to deal with any last-minute problems that may arise. Scheduling closing for the 20th or 25th will give you plenty of time to deal with whatever comes up. In addition to the closing date, make sure you give yourself plenty of time to complete the closing on closing day. Don’t rush through it between appointments, because it may take longer than expected and if you don’t have enough time you may have to postpone the closing or miss your appointments. Lastly, schedule a final walk-through 24 hours before closing, to check for damage that may have been done during escrow, and to give you and the seller time to negotiate any of the repair costs.
What Should You Bring To Closing?
There are some items you will need to bring in order to complete the closing.
- Photo ID: the closing agent will need to verify you are in fact the correct person. Bring a driver’s license or passport.
- Cashier’s or certified check: This is how you will pay the closing costs and down payment. You won’t be able to use cash or a personal check, but this won’t be a problem, as you will have been informed of the exact amount you need and whether you will need one check or two.
- Proof of Insurance: You will need to show the closing agent proof that you have active insurance and a receipt showing you paid for one year of coverage.
- Final purchase and sales contract: Bring this to closing just in case, as you may want to double-check the contract during closing.
Who Will Be at Closing?
There are generally quite a few people at closing, so here’s who you can expect:
- Seller’s agent
- Seller’s attorney
- Your agent
- Your attorney
- Title Company
- Closing agent: a third-party agent to the transaction and is there to provide information and facilitate the transfer of the property from the seller to buyer.
As the buyer, you will be responsible for the brunt of the closing costs. On closing day you will be paying everyone involved for their involvement in the closing process. Closing costs will be roughly 3% of the loan amount, but don’t be surprised if they end up being more than that. You may be asked to have cash reserves in your bank account, in addition to the closing costs, to prove that you can pay the first few months of your mortgage. Ask your lender what their cash reserve requirements are. Here are the closing costs you will be responsible for on closing day:
- Loan origination fee: This is the processing fee for the loan.
- Loan discount points: These points are prepaid interest that can be applied to the loan to lower rates.
- Appraisal fee: The lender will have the house appraised to make sure the value of the home matches the loan they are giving you. You will need to pay the appraisal fee to cover this.
- Credit report fee: The lender also runs a credit report to make sure you are qualified to receive a loan.
Documents To Sign
As the buyer, you may be signing anywhere from ten to thirty documents on closing day, so bring your favorite pen. Here are some documents you can expect to see:
- HUD-1 Settlement Statement: This form states all the charges to the buyer and seller at closing.
- Truth in Lending Statement: This form is given to you by the lender, usually prior to closing, and lays out all the terms of the loan.
- Deed: The seller will bring the deed to the closing, and this is the document that officially transfers ownership from the seller to you.
- Note: The note is the contract with the lender, which includes your promise to pay the mortgage and the penalties if you fail to do so.
- Mortgage: The mortgage legally secures the note, and grants the lender power to carry out the penalties included in the note if necessary.
Things to Avoid
Closings are often prolonged or held up due to problems that could have been avoided. Some of these may be out of your control, such as property liens that the seller failed to clear. However, there are some things you can do as a buyer to make sure your closing goes smoothly. First, make sure you complete your final walk-through. Without doing the walk-through, it is unreasonable to ask the seller to pay for repairs because you don’t know the condition of the house. It is also important that, once in escrow, you don’t make any major changes to your financial situation. Don’t open up a new credit card account, max out your existing card, or take out a new loan. These are changes that may cause the lender to back out of the deal. You don’t want to throw any wrenches into the deal on closing day.
If you are lucky enough to have everything in order and the closing proceeds as normal, you can expect to be handed the keys to your new house in a few hours.
You or your lender will provide payment to the seller, you will provide payment for the closing costs, the seller will sign the deed over to you, transferring ownership of the house, and the title company will legally register the new deed. You will then be the official owner of your new home, so congratulations, and enjoy. If you are in need of a buyer’s agent to make sure you close on the house you want, contact Delphine Nguyen with the Delphine Team of Baird and Warner to get the job done.