Purchasing a home is one of the greatest investments a person or family makes in their lifetime. It’s an exciting moment when you sign the closing documents and receive the keys to your new home. But what is the process that leads to this moment? What can new homebuyers expect on closing day? Here’s some advice to help you navigate this exciting venture.
The closing process, or settlement, is simply when the owner of a property transfers their ownership to a buyer. The escrow company handles the distribution of the funds and the new deed is registered to the new owner’s name. The buyer has the responsibility of paying for all the outstanding fees that are accumulated throughout the process. Then, the keys are handed over and a new owner takes over the home!
The home buying process is a long tale of many key players. On closing day, you should expect to see quite a few of the people you’ve worked with throughout the course of your settlement. This varies depending on your locality, but you can generally assume the following will be in the room with you when you sign your mortgage:
- The home seller
- The seller’s real estate representative
- Title company’s representative
- Any attorneys involved, this includes the seller’s, lender’s, and your attorney if you have one
- Closing agent: the person guiding the closing procedure
The steps leading up to the closing will consist of many things. A shortlist includes:
- Finding the house
- Opening escrow
- Get pre-approved for a mortgage
- Negotiate closing costs
- Complete a good-faith home inspection thoroughly
- Complete pest inspection
- Renegotiate the offer if needed
- Lock your interest rate
- Remove contingencies
- Final walkthrough
In all, the closing can take anywhere from 30 to 50 days to finalize. As you can see, there are a lot of moving parts and even more paperwork. Be sure to keep track of every single document you accrue throughout the settlement process and take it with you on closing day as you might need to refer to it one last time.
On the actual day of closing, your most exciting day, you can expect to do the following:
- Sign the legal agreements. The two vital agreements you’ll be signing are the lending agreement detailing the terms and conditions of the mortgage, and the agreement between you and the home seller to transfer ownership of the property. Be sure to read these carefully before signing.
- Three days before the closing day your lender will give you the Closing Disclosure which details the mortgage rate you’ll be paying each month. Compare it with the loan estimate you received earlier in the process and renegotiate if necessary.
- You’ll receive the mortgage note which is a contract that binds you to repay your mortgage.
- You’ll receive the deed of trust, which gives your lender a claim against the home should you be unable to pay your mortgage.
Schedule the Closing
It seems like a small detail in the scope of the settlement procedure, but scheduling your official closing day for 5 days before the end of the month might save you some money. It’s uncommon, yet possible, that anything that can go wrong, will. If you schedule your closing day for the last day of the month to buy yourself time and because you’ve paid for the month of prepaid interest, you could be doing yourself a disservice. Give yourself the cushion of time before the end of the month to sign the closing papers to account for any surprises that might arise. With that said…
As with any large decision or investment, there is a justifiable risk of uncertainty and surprises. Mitigate these surprises by staying on top of the process and being prepared. Planning helps to prevent unexpected mishaps. Here are two practical ways to avoid this from happening to you.
- Stay organized and respond to your lender fast
- Stay away from big purchases right before closing. Purchasing things on credit, like new appliances can cause your credit score to look less stellar than it actually is. This can cause complications when the bank runs your credit a few days before closing.
If you’re prepared and know what to expect on closing day there is no reason the process shouldn’t go smoothly. Of course, it takes organization and preparation to ensure the day goes according to plan, but having a mortgage lender by your side protecting your decision and working with you will guarantee a smooth settlement. The mortgage lenders at Brand Mortgage are passionate about the work we do and see to it that our clients walk away happy with keys in their hand on closing day. Contact us today to begin your journey of creating memories in your new home.