Closure on Your Home
It's time for the end game. All the financing, house hunting and negotiating come together into one final step — the closing. This can be a confusing and anxious time, especially if you're not familiar with the process. If you're pre-approved and you've saved enough money to handle the extra costs, you've done everything you can do. So try to relax as you go through the closing process.
Once you've found a home, made an offer and the seller has accepted your offer, the seller's agent draws up a contract specifying the terms and a closing date. When you sign this contract, you have officially agreed to purchase the home. Have a real-estate lawyer, or at least the real-estate agent representing you, look over your contract. There are many small details that could make the difference between a good deal and a bad deal. An experienced professional can help ensure you're getting the former.
Good Faith Deposit
When you make an offer on a house, you'll have to put down a deposit. This is to discourage you from putting a bid in on a lot of different houses with the intention of buying only one. This deposit is usually between $10,000 and $25,000 thousand dollars. If the deal falls through, you will get this money back unless you failed to perform as you contracted. If the deal goes through, the deposit goes towards your down payment and your share of closing costs.
The contract almost always specifies contingencies. That means the contract is only valid if certain requirements are met. So, for example, if your financing doesn't come through, you still aren't obligated to purchase the home. Contingencies also cover home inspection (defined later), termite inspection, title search and several other possibilities that could nullify the deal.
Don't skip the home inspection. It is one of the most important parts of the home-buying process. There may be big problems with a home that can't be detected with an untrained eye. A home inspector will go through the entire house to make sure there are no problems that will either affect its value or cause major problems in the future. If the home inspector finds any major problems not disclosed before you signed the sales contract, you can use the inspection contingency to walk away from the deal or to renegotiate the price.
Requirements for Closing
Be ready for closing so that the process can move quickly. Your real-estate lawyer will handle the process for you (there are separate lawyers for both sides of the deal: buying and selling). You will be given an estimate of the closing costs and fees up front.
Before you can close on a house, you need certain documents. It is your lawyer's job to get these for you. They are the following:
- Title Search — This ensures the seller is clearly the owner of the house and that there are no liens against it.
- Title Insurance — If there is a problem with ownership, including fraud and forgery, the costs of dealing with those problems will be covered.
- Survey — In some locales, a surveyor will be employed to make sure that the dimensions of the lot are accurate and that the buildings on the lot comply with the applicable bylaws.
- Homeowner's Insurance — Since the home is the collateral for the loan, a lender will not give you a mortgage unless you have fire and casualty insurance in place before for closing. If you carry auto insurance, ask that agent for rates on home insurance. Insurance companies often give you better rates if you have more than one type of policy with them.
The cost of closing a home can be thousands of dollars. You should have some money set aside for these costs. But before you sign the contract, see if you can negotiate to have the seller pay for more of the closing costs. They are receiving a large amount of cash and will more easily be able to afford a few thousand dollars in closing costs. You may not be able to negotiate more than is customary in your area, but it doesn't hurt to try.
Before the deal is closed and you take possession, you should arrange for utility companies (such as electricity, water, fuel and telephone) to begin service in your name.
Your first regular mortgage payment is likely to be due one regular payment period after the Interest Adjustment Date (IAD). This is the date on which the term of your mortgage really begins. If mortgage funds have been advanced before the IAD, you will be required to pay interest from the date the funds are advanced until the IAD.