Buying a home is a lot of work, but it’s a lot of fun too. Amid all of the excitement of the buying process, most buyers manage to stay organized. But it’s tough to keep track of everything from searching for the right home to getting an inspection and finally closing the deal. Despite the best planning, many people lose sight of their needs and priorities during the closing process.
When you sit down at the closing table you are close to finishing things up. But it’s no time to get lazy. If you don’t keep your focus the whole way through, you may end up making a big mistake that could cost you thousands of dollars. Keep these five tips in mind and you’ll make your way through closing error-free.
Real Estate Closing Process
1. Double-check Your Loan Type
It may sound crazy, but it’s easy to miss a major mistake when you’re so focused on the fine details of closing. Even a simple clerical error can accidentally stick you with a variable rate loan when you thought you were getting a fixed rate mortgage. How bad would that be?
What I did: Rather than hope for the best and trust everyone behind the scenes, I called my lender, closing company, and agent to discuss this point. After hearing the horror stories of buyers getting “duped” into a bad loan, I wanted to avoid trouble at all costs. By involving three separate parties I was confident about getting the type of loan I wanted.
2. Consider Your Financial Situation
How much is your down payment? Do you have enough cash for closing costs? Your lender and closing company should provide you with your numbers several days in advance, so you can review the details on your own time. Make sure you keep your real estate agent in the loop, and be sure that you’re comfortable with how much you need to pay up front and the long-term implications of your mortgage. It’s not too late to make some adjustments, and your agent will be able to guide you in the right direction. Your mortgage company will help you make the wisest money decisions.
What I did: I put 20% down on my home. While it was my goal to put 20% down, it wasn’t my only option. My lender laid out the numbers for other down payments. For example, I could have put 10% down to save some liquid cash, but doing so would have raised my monthly payment and forced me to bring private mortgage insurance into the equation. If you’re fortunate enough to be able to afford putting at least 20% down, do it, and you’ll be happier in the long run.
3. Get What You Need from the Seller
Hopefully you made a checklist of improvements you required when you first walked through the house, and on subsequent visits too. Make sure that the seller has completed everything you expected. For example, you may have requested certain repairs. On your final walk through, make absolutely sure that the seller has taken care of everything you need.
If for any reason you’re not going to have a last look at the property before closing, make sure your agent is aware of the situation so he or she can guarantee that all changes are complete.
What I did: I took two steps to make sure I got what I needed:
- I made sure that everything was in writing and signed off on by both parties. You should never take the word of the seller. If you don’t have promises in writing, then you don’t have the legal right to be sure they’re fulfilled.
- I scheduled a final walk through, with my agent, for the day of closing. Fortunately, I found that everything was in order, but you might find yourself in a different situation. Had something been wrong, the walk through would given me a chance to raise the issue with the sellers at closing.
4. Psych Your Self Up
Closing costs are expensive. And while it’s technically not too late to make changes or back out, it’s certainly too late for you to experience sticker shock. Take responsibility for knowing your closing costs and what you’re paying for. Some of the most common fees include:
- Credit check
- Escrow fees
- Document preparation fees
- Title insurance
There are plenty more fees, and while the rates may seem high, you can’t avoid them. They add up. Review all the fees at least one day before closing, so you can ask questions and make sure you’re not double-paying or buying things you don’t need.
What I did: A couple of days before closing, I got an itemized list of costs from my lender. It showed me my down payment and information on each and every expense that goes into the closing process. From a $25 credit report fee to several hundred dollars for title insurance, I understood where all of my money was going. Though the total amount was high, I knew I didn’t have to seek a third party for title insurance and other items.
5. Don’t Leave Empty-handed
You might feel anxious about your final signature, but once you finish with the paperwork, you’re going to feel relieved. Don’t get caught in the emotion and excitement and rush out of the building. You must take your copies of every document, and immediately store them in a safe place. You never know when you will need this information in the future. Make sure you get your keys, garage door opener, and other crucial items for your new home.
What I did: I always double-check everything, and on closing day, this habit paid off. The closing company forgot to give me my copy of the HUD settlement statement. Right before I walked out the door, I realized I didn’t have it. Sure, I probably could have asked for this at a later date. But I could have easily forgotten, wasted a lot of time with red tape, or been without it in an urgent situation. I made sure I got what was mine.
Throughout the whole process of buying a home, you’ll often feel overwhelmed by stress and tough decisions. You may even feel like everyone’s trying to take advantage of you, the buyer. Don’t forget that you’re the one spending the money, and you deserve the royal treatment. Don’t let the little mistakes ruin what should be a great day. Before you give your final signature, you’re still in a powerful position. Make sure you check all of the details and get what you need. Take your time. Keep your head clear. And enjoy the moment. By following these tips you’re on your way to a smooth closing and a great start to life in your new home!
What troubles did you face in your last home purchase, or what are you biggest concerns about your upcoming closing date?