A First-Time Home Buyers Guide to Closing

If you’re a first-time home buyer, you’ve got questions. You might be a little nervous about spending making one of the most important financial decisions of your life. Now that your purchase offer has been accepted, the next question you might want to know is what to expect and how long it will take for the process to be completed.

The house is not yours until you close on it; sometimes buyers and sellers are anxious that something will happen to prevent the sale, but most closing go smoothly. The key to a successful closing is to properly prepare your loan documents and contract, then conduct final obligations.

Closing on a home is the date on which the sales transaction is complete and the buyer assumes ownership. This means that a title search has been completed, the mortgage lender has made a commitment to finance the purchase, and all other conditions for the purchase have been met. The buyer’s lender will determine the length of time required to process the loan and close once all documents are signed, payments are made and no issues arise.

Transactions generally close within 30 to 60 days after your offer has been accepted. It is now time to take the necessary steps that will bring you to the day of closing.

How to Prepare for a Closing

Step 1 – Select a Closing Agent with Your Real Estate Advisor

Depending on where you live, any number of entities can handle the closing process: a lender, escrow officer, the Title Company, real estate brokerage or lawyer. Ensure your closing agent is familiar with the closing process in your area; for example, different regions in California requires escrow instructions to be written on the front versus the back end. Ask your trusted financial advisor for recommendations.

Step 2 – Schedule a Final Inspection of the Property

Schedule an appointment to walk through the property one last time. You should have already had a professional home inspection, the purpose of this final walk through is not to try to find problems with the home, but rather to ensure the seller has fulfilled any instructions, requests for repairs specified in the contract and left any appliances they agreed to leave.

Your real estate agent t with the can make an appointment for you with the seller’s agent. If you notice anything unusual, your real estate agent should notify the seller’s agent immediately to get the issue resolved.

Step 3 – Show Proof of Homeowners Insurance

As a condition of a mortgage, almost all lenders require a home buyer to purchase homeowners insurance. You will need the insurance company to submit documentation of your policy in advance of the closing date. Speak with your trusted insurance agent to select a policy that meets the requirements set forth by your lender.

Step 4 – Show Proof of Title Insurance

Most lenders also require a home buyer to purchase title insurance in order to obtain a mortgage. A title insurance policy is a relatively simple type of insurance that protects the buyer or lender in the event there are problems with the title to the home after the sale.

A lender’s policy protects the lender in the event an issue arises with the title after the property has been bought. An owner’s policy protects you, the home buyer.

Step 5 – Finalize Your Loan Paperwork

Schedule a meeting with your mortgage lender before the expected closing date to ensure any closing costs funds are available (generally closing costs are about 3 to 5 percent of the total loan amount), all conditions of the loan has been met and any necessary documents have been received and approved to the lender’s satisfaction.

Your real estate agent will advise you of the exact amount of the closing costs. Any last minute and relatively small costs that may arise at the closing can usually be handled with a personal check.

Common Delays and Issues

Oftentimes problems with closing a home purchase occur after the file is submitted to the underwriter. Loan officers, no matter how familiar with underwriting guidelines, can’t always predict an underwriter’s response in approving the loan agreement. Here are common problems that can delay or prevent a closing:

  • Debt, liens or judgments found on the buyer’s updated credit report
  • Change in the buyer or seller’s marital status
  • Low or Non-Matched Appraisal Documentation
  • Missing Financial or Insurance Documents

If the purchase contract does not contain a provision that makes closing contingent upon loan approval, your deposit could be at risk if the loan is not approved and the transaction does not close.

Don’t Forget to Ask Questions and Prepare for Moving Day

While you certainly can ask questions at your closing, if you have any lingering questions or concerns, you should ask them before the closing is finalized. Speak with your loan officer, real estate agent, attorney and/or trusted financial advisor.

The final step is to reserve movers and arrange for the transfer of utilities accounts transferred into his or her name as of the closing date. If you wait until the closing date you could find moving van reservations booked out for several weeks and delays in receiving water, gas, electric or cable services. Make necessary plans in advance of your closing date to ensure your home is ready to move in the day you receive your keys. This step is often required for the closing to take place, but is also a good idea since it allows the home to be ready to move into on the closing date.

If you need a referral to a great real estate advisor, let me know. —

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