You’ve found the perfect home and the seller has accepted your offer. You’ve submitted all the necessary paperwork, your credit has been checked, and now you’re awaiting the final and most anticipated step in the mortgage and home buying process – closing. To empower you in this step, we’ve covered what to expect during closing, provided some closing tips, and shared what to avoid before closing on a home.
At a high level, closing, also known as settlement, is where the final paperwork is signed, money is transferred to the appropriate parties, property ownership is traded from the seller to the buyer, and you legally commit to your mortgage. During this step, you will typically be joined by your co-borrower, if applicable, an escrow officer, the seller’s attorney and yours, the closing agent, and the real estate agents who have been involved in the process on both sides. While each closing may be unique, you can expect the following events to occur during your closing:
Once all paperwork has been signed and filed, all money has been properly distributed, and the deed to the home has been signed over to you, you will officially become a homeowner. To be sure everything runs smoothly up to this point, we’ve put together several tips to keep in mind leading up to the closing day.
Three days before your closing date, you will receive a closing disclosure or HUD-1 Settlement Statement. This document outlines your exact mortgage payments, loan terms, and additional fees, or closing costs, you’ll pay. We recommend reviewing this document and comparing it to your Loan Estimate. If you spot any discrepancies between the two, be sure to run these by your lender.
It’s likely there are several contingencies attached to your purchase agreement r tasks that buyers must complete before closing. Some common contingencies include the home inspection contingency, the appraisal contingency, and the financing contingency. Be sure to complete any contingencies either within the timeframe set or before closing.
Most mortgage lenders will require you to purchase homeowners insurance before closing on a home. Since the mortgage company provides most of the funding outright, they essentially become a majority ‘stakeholder’ of your home. Therefore, insurance is required because the home becomes a liability if it’s not properly insured. Be sure to either bring the policy itself or proof of purchase to the closing.
In most cases, you’re allowed a walk-through at least 24 hours before closing. During the walk-through, you’ll want to make sure the seller has moved out completely unless you’ve agreed to let them stay for a period of time after closing. You’ll also want to ensure the condition of the home is what you agreed upon in the contract. If the home inspection revealed problems that the seller agreed to fix, be sure to check that those have been completed.
In summary, as a buyer, it’ll be important to have a clear understanding of your mortgage terms and what costs you’ll need to pay and to whom. Be sure you have everything in order, from the completion of any contingencies and paperwork to the final walk-through, before you become the legal owner of your new home.
Until you receive the good word from your mortgage lender that your loan has been approved, you need to maintain your financial status quo as much as possible. You’ll want to keep your bank account as close to the way it was when you were pre-approved for a mortgage loan. This means you should avoid making any large deposits into your bank account, shifting funds, or withdrawing any large amounts. We recommend placing your down payment into one account and keeping it there until you’re approved, then withdrawing when it’s needed during closing.
Applying for a new credit card, or taking any action that requires a credit check, such a buying a new cell phone, signals to your mortgage lender that you’re taking on more debt, even if you aren’t.
One of the things your lender looks at closely is your employment history. They use this as a gauge to determine your financial stability and to see if you would be capable of making your loan payments.
It can be tempting to use credit to start purchasing furniture and appliances for your new home before you’re approved. Or, buying a new car to go with your new home. These purchases will change the current state of your credit as you bring on more debt and will likely hurt your chances of approval.
In a nutshell, be sure to avoid making any large or significant changes in your life or your finances, such as changing jobs or taking on more debt, while you’re waiting to be approved for a home loan.
Now that you have a better understanding of the closing process, and some tips to follow and things to avoid, are you ready to take on the final step in the mortgage and home buying process? Reach out to us today, or apply online with our online application to get started on your home buying journey.
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