Four Tips for Avoiding Surprises at Closing
The closing date marks the official end of the home search and buying process. It’s an important day worthy of celebration. On this date buyers complete paperwork, submit all required documentation, pay fees and make first payments, all leading up to the moment of truth – when keys are finally handed over! So how does such an exciting, highly anticipated moment become so stressful?
In a recent survey, nine out of ten buyers said they felt prepared when they bought their home but in hindsight, more than half regretted not knowing more about the financial aspects of the process. So, here are some tips to decrease anxiety and help ensure a positive closing experience.
1. Schedule final meetings a few days before the closing date
Schedule a final walk-through of the home with your real estate agent to verify that the seller has vacated the premises and completed the agreed-upon repairs. Meet with your mortgage lender to ensure all necessary paperwork is complete and any conditions for approval of the mortgage have been met.
2. Obtain insurance and bring verification
Secure homeowners’ insurance and title insurance policies as soon as possible. After your offer is accepted, you may want to start researching and allow time to compare policies. These policies are typically required in order to obtain a mortgage and must be presented at closing. The title search and subsequent title insurance provide a legal safeguard against any third party claims that could invalidate property ownership.
3. Know the costs and be ready to pay them
In general, closing costs can be about 3-5% of the loan amount. Your mortgage lender will provide you a good-faith estimate to use as a guideline. Your real estate agent will let you know the exact amount of payments that need to be paid, including the down payment. Since banks often place a hold on checks, make sure deposits are made enough in advance of the closing date and do not move funds from accounts allocated for closing funds disbursement. Payments may be required in the form of a cashier’s check so allow enough time for that extra step.
4. Compare estimate to official document
The HUD-1 Settlement Statement is a detailed list of all costs related to the sale of the home. The law requires that each party receive a copy of the settlement statement at least 24 hours prior to closing. It should be similar to the good-faith estimate you received weeks earlier so be sure to compare the two. Although you can expect costs to vary slightly from estimates, ask about any major discrepancies.
The home purchase process is often likened to a roller coaster ride. But, with the guidance of qualified mortgage and real estate professionals, you can be prepared for each step and minimize the unexpected twists and turns. To find a local mortgage advisor to help you get started, click here.