Your offer has been accepted and you’ve jumped through all the financing hoops required to land your new home. Congratulations! It’s almost yours, but there is one more item to check off the list before the keys are handed-over and you can finally move in – it’s closing day.
Borders and Borders has done thousands of closings handling every kind of situation you can imagine, and we know that closing on a home can be stressful, especially if you don’t know what to expect. So we’d like to share some useful information that will help your closing go smoothly and may provide you with peace-of-mind at the end of your home buying journey.
1. What Is Closing and When Does it Happen?
Closing is the last step before you become the legal owner of your new home.
During the contract negotiation phase, you (the buyer) and the seller set a closing date, which is listed on the purchase agreement contract. After the seller accepts your offer and earnest money—money given to secure the contract—you can expect to wait a while before your actual closing date.
Even though you and the seller may agree on a closing date, your agents will probably work with your lender and title agency to suggest a timeline that allows them enough time to correctly execute their end of the deal.
2. How to Prepare for Closing on a House
You’ve made it to the end of the home purchasing deal, and you want to ensure that the final steps go smoothly. Make sure you have a solid team on your side, starting with a qualified real estate agent if you don’t already have one, and an experienced closing attorney who can handle any problems or difficulties that might pop-up. You definitely need experts who know the Louisville market, so you don’t experience unpleasant surprises.
Your agent can also help you network with other valuable team members you may need including:
Escrow officer
Mortgage professional
Home inspector
Borders and Borders real estate attorneys
Borders and Borders can also assist with title insurance
A checklist is always helpful
After you gather your team of experts, they can help you review your contract and prepare for closing contingencies. Closing contingencies are conditions listed in the contract that must be met before the home transaction becomes legally binding. Contingencies may include:
Home Inspection: To protect yourself, hire a home inspector to make sure there aren’t any hidden faults that could be very costly after the deal is finalized.
Appraisal: This is required by your mortgage lender to keep them from loaning you more money than the house is worth. You or your real estate agent can arrange for a professional appraiser to estimate the property’s current market value. The appraisal fee will be included in your closing costs.
Loan Documents: Even if you were pre-approved for a loan, you still have a few more hoops to jump through to get final approval on your financing. Prepare yourself by organizing all your documentation: identification, income statements (pay stubs, W-2 forms), asset statements (bank accounts, investments), insurance information, and a copy of the contract. You’ll also need—if applicable—a divorce decree (child support, alimony information) and bankruptcy papers.
Homeowner’s Insurance: Homeowners insurance is a must because it covers the cost to repair, rebuild, or replace your new home or items in your home if it is damaged or destroyed. Typical policies also protect you with liability coverage against accidents in or on your new property. Homeowners insurance is often required by a lender and is often included in your monthly mortgage payment.
Final Walkthrough: The final walkthrough will be scheduled by your real estate agent — This typically happens 24 hours before closing. At this point, all the seller’s belongings should be completely cleared out, except for anything you agreed to keep. Bring your contract to make sure the condition of the home matches the original agreed upon state. Test major appliances, light fixtures, toilets, windows, doors—and basically anything you can think to test. Take your time and bring any unwelcome surprises to your real estate agent’s attention immediately.
3. Closing Problems That Cause Delays
Potential delays could get in the way of your closing. These problems could happen any time after your offer—even up to and including the day of your closing.
Appraisal Problems
It’s possible an official appraisal could be lower than expected. But more often than not, a low appraisal is a warning sign you may be paying more than the home is worth. No matter the cause, your lender can’t approve a loan amount for more than the appraised value of your home. If you do end up with a low appraisal, you have options:
Ask the seller to lower their asking price. (You might even have a contingency in the contract that protects you from buying a home for substantially more than the appraised amount.)
Challenge the appraisal or request a new one if it contains incorrect information. (Talk with your real estate agent about this.)
Cancel the contract.
Meet in the middle with the seller to pay out-of-pocket cash.
Loan Problems
If you made your offer on your new home before you were pre-approved for a loan, your bank will now begin digging into your finances to determine how much they’re willing to lend you. This could go really well—or really wrong.
Ideally, you need to be pre-approved for a mortgage (not just prequalified) before you begin shopping for homes. That way you know your exact price range, and you won’t make offers on homes you can’t afford.
Home Inspection Problems
Nearly every home inspection—even those on new homes—will turn up some issues. Some are minor and can either be ignored or resolved by further negotiating the terms of the purchase contract.
However, some issues like insect infestations or water damage are warning signs you can’t ignore. Foundation problems and major electrical or plumbing problems are also expensive to repair and indicate potential ongoing problems with the home. As much as you love the home or the location, it’s usually better to walk away than to walk into a home with costly complications.
Walkthrough Problems
Imagine if—during the final walkthrough—you find something that’s been damaged, or you notice the seller removed something that was supposed to stay. The process to resolve these issues could delay your closing date.
Paperwork Problems
On closing day, you’ll sign your way through 50–100 pages of paperwork. After weeks of waiting, you may be tempted to breeze through all the confusing legal jargon just to be done. But this is no time for a race to the finish. Make sure you read and understand what you’re signing. A Borders and Borders attorney will walk you throughout the process every step of the way. Don’t be afraid to ask questions and be sure to rely on your expert attorney’s knowledge and experience.
4. What Do I Need to Bring on Closing Day?
To make sure everything runs smoothly, you’ll need to bring a few things to your closing appointment. Borders and Borders and your mortgage loan officer will provide a checklist of everything you’ll need. This list includes:
Photo ID
Outstanding documents or paperwork for the title company or mortgage loan officer
Certified or cashier's check made payable to the title or closing company for closing costs that aren’t being deducted from the sales price
5. What Happens on Closing Day?
On closing day make sure your hand is warmed-up because you’ll be signing your name – a lot!
Here’s what you can expect:
You’ll pay any remaining closing costs, as listed in your Closing Disclosure.
The seller will sign documents to transfer property ownership.
You will sign a:
- Settlement statement that lists all costs related to the home sale.
- Mortgage note stating your promise to repay the loan.
- Mortgage or deed of trust securing the mortgage note.
Borders and Borders will register the new deed in your name.
6. Where Does Closing Take Place?
For your closing appointment, you’ll likely meet at the office of the escrowee – Borders and Borders.
7. Who Attends the Closing?
Attendees include you (the buyer), the seller, the escrow/closing agent, the attorney (who might also be the closing agent), a title company representative, the mortgage lender, and the real estate agents. But if the seller pre-signed the deed and transfer documents, they probably won’t need to be there.
Closing day is a big day for everyone involved. Knowing that Borders and Borders is on your team can make your big day go as smoothly as possible providing you with the confidence and peace-of-mind you need as you take your final step into home ownership. Learn more at BordersandBorders.com