Closing on a home is an exciting time. It's the end of one long journey and the start of a new adventure.
It's not fun to think about, but a transaction can run into trouble until the very moment closing is done. There are important steps you can take before closing to keep unusual, but serious, complications from developing at the last minute. Your real estate agent is sure to help you stay on track, but you'll be even more prepared with a little research — exactly what you're doing right now.
Here are the key steps to take care of before closing:
- Ensure the Home Has Been Inspected
Contingencies are things the buyers must do before the transaction is final. The most common of these is the home inspection contingency, which is required by many mortgage lenders. Inspections cost $300-$500 but can save you thousands of dollars in repairs. Problems with the electrical system, the septic system, and the roof have been known to scupper a deal within days before closing.
- Finalize Other Contingencies
Appraisal is another common contingency — it requires a home to be appraised for a certain amount before the deal goes through. The amount is usually dictated by the lender, who needs it to be high enough to match the funding package. If appraisal fails, funding may need to be renegotiated.
- Clear the Title
"Clear title" means it's been verified that the seller has the legal right to transfer ownership of the property, and you have the legal right to receive it. Title problems can arise if there's a lien on the property — usually, issues are seller-related and couldn't have been known by the buyer in advance. Begin this process as early as possible so the seller can take action if any issues are uncovered.
- Get Final Mortgage Approval
Final approval takes place when the mortgage loan goes through underwriting. Underwriting is the last check of your credit score, your finances, and the appraisal of the property. Final approval can be quick and easy if you already get preapproved for a mortgage at least a few weeks earlier.
- Review Your Closing Disclosure
The closing disclosure is a massive document that communicates all the fine details of the sale that the buyer must be made aware of in writing. It includes details on any contingencies and provisions. It can be an extraordinarily dense document, so it is wise to work with a real estate lawyer to understand it all. Remember, you have the legal right to an adequate review period for your closing disclosure!
- Perform a Final Walk-Through of the Property
The final walk-through is often just a formality, but it is not one you want to skip. If you've made an agreement with the seller to perform any repairs (based on the home inspection), this is the chance to verify that work has been done. If you see anything out of the ordinary, you can still raise an objection.
- Bring All Your Documents to Closing
Your real estate attorney will give you a detailed list of documents to bring to closing, which may be communicated directly or through your real estate agent. Some of the most critical include your homeowner's insurance policy, a copy of your contract with the seller, home inspection reports, any paperwork required by the bank, and a valid government-issued photo ID.
A successful closing is a relief to everyone — the buyer, the seller, and everybody who helped them along the way. Follow these tips, and you'll be doing your part to make sure that it all goes through smoothly.