Stage 7 — Closing The Deal
You already found your new home, got your offer accepted and your loan approved. You are almost there, and that new home’s key is as good as in your pocket! However, before you start choosing new furniture, there are still a few things you need to take care of.
The actual closing of your home purchase involves signing all the mortgage paperwork and taking possession of the property. Let’s go over what’s involved.
Closing Disclosure
Before closing the final deal, you’ll get a document called “Closing Disclosure”, which among other things includes a summary of the final costs for your loan.
To help the closing process go as quickly as possible, it’s crucial that you acknowledge its reception ASAP. Lenders are legally mandated to provide you with the closing disclosure document three business days before closure. Failing to acknowledge the document’s reception only serves to delay the closing of the deal.
Pro Tip — Expect A Discrepancy
It’s expected for the cost outlined in the closing disclosure differ from the previous estimates. However, it should remain within 10% of the loan estimate you had previously discussed.
Final Walk-throughs
Usually, you’ll get the opportunity to do a final inspection of the property you are about to buy one day before closing. The purpose of this walk-through is to make sure everything is in order before it becomes a done deal.
Final walk-throughs are meant to prove the property is in the same condition stated in the purchase agreement. They are also ideal to ask a few vital questions for further clarification.
As you perform your final walk-through, make sure to inquire if:
- All agreed-upon repairs and house fixes were completed.
- All the appliances, items, treatments, agreed upon were left behind by the seller, and remain in the condition expected.
- There have been any damages made to the property when the seller moved out.
- All the faucets, lights, garage doors, and the like are in working condition.
- All hazardous materials (old paint cans, construction materials, etc.) were accordingly removed from the premises.
Pro tip — Delaying Closure
Remember, you should never agree to ( late-game ) important changes. If during your final walk-through you notice any major issue or breach of terms, you can ask to delay the closing or contact the listing agent to negotiate a fair solution.
What You Should Bring to Closing
Preparing to close can be a stressful and exciting proposition, so it helps to have a handy checklist of the things you should bring along:
- Valid government-issued photo ID (such as your driver’s license).
- Cashier’s check (or wire-transfer proof) to pay down payment and closing costs.
- Your closing disclosure copy to compare to the final paperwork.
- Key-contact list (lawyer, agents, etc.) in case you have any last minute questions.
Who Should Attend the Closing
Ideally, every buyer on the loan should attend the closing the closing. Keep in mind that it’s possible to close even if you aren’t there, but you’ll need to provide someone with a power of attorney.
Some states require both, the buyer and the seller, to be present at closings, and other states have separate closings for each party. Depending on these conditions, you may or may not see the property’s seller.
You should expect a closing agent to be present facilitating the whole process. They are a neutral party attending to help you and your counterpart through a smooth operation.
Also, while not required, your real estate agent can attend.
Payments to be Made at Closing
Finally comes the time to finish up closing payments and receive your new home’s keys. Here’s a summary of the most common up-front costs you’ll need to take care of:
- Down payment: this becomes the equity you have in the home.
- Escrow funds: Collected by your lender during closing to ensure there’s enough to pay tax and insurance bills when they come due.
- Third-party fees: Any costs incurred by your lender from third parties used to process your loan (appraisal fees, title insurance costs, credit report fees, etc.)
- Per diem interest: You have to pay interest upfront for the period between closing and your first mortgage payment due date.
- Homeowners association dues: If you are moving somewhere where applicable, it might be as much as a year’s worth to be paid at closing.
- Discount points: in case you chose to pay a fee to lower your interest rate.
And just like that, you’ve become a homeowner! Congratulations!
However, this guide wouldn’t be complete without at least touching upon the topic of mortgage management.
