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Buyer's Guide
Home Buying Guide Part Seven

The Real Estate Closing: Sign Here, Sign Here, and Sign Here!

During the “pre-closing” stage, there are a few simple things you must accomplish.  They may seem overwhelming, but if approached calmly and in a timely manner, crisis can be avoided.

  1. Maintain a tight hold on your finances
  2. Complete and return all phone calls and paperwork promptly
  3. Maintain buyer-agent communication weekly
  4. Confirm all documentation is in order
  5. Acquire certified funding for closing
  6. DO A FINAL WALKTHROUGH

That’s it; you are in the homestretch!  Time for the lender to confirm your home’s value and legal status, as well as your credit worthiness…do you still qualify for a loan?

Pre-Closing Checklist:

  1. Appraisal – confirms a home’s value
  2. Survey – defines a home’s legal boundaries and an owner’s property entitlements
  3. Title Search – verifies ownership and Title Insurance; protects against mistakes and oversights
  4. Final Credit and Financial Check-Up

Word of Advice: Focus on staying “mortgage worthy.”Keep your finances in check, your credit report clean, and all funds ready for closing.  Therefore, no splurging, buying on credit, or spending your cash reserves!  Freeze your finances to the best of your ability.  Doing this could cause you to no longer qualify for a loan, and your deal can fall through!

Lending institutions use this time period to check if a pending mortgage is a sound investment before they allow you to finalize it.

  • An appraisal is an ESTIMATE, not a concrete determination or value.  It is the calculated reasonable, fair market value of a property.  One that falls in the same range as the one that buyers discover during the home buying process.  This confirms whether or not you are paying a fee equal to, over, or under the true value of the home.

Word of Advice: A buyer can fight an appraisal and order a new one to be done.

  • A survey is a procedure commissioned by the lender and added to the buyer’s closing costs.  It provides a bird’s eye view of property lines to make sure your home doesn’t touch another’s property.  This prevents unjust sales from taking place.  It also helps locate areas of easements, meaning it clarifies for owners where they can and cannot build according to law.  For example, construction/additions cannot interfere with access to power and sewer lines.

Word of Advice: You should get a new survey done, even if the seller recently had one done.  Then, save the finding for future reference so you know where NOT TO BUILD.

  • The title refers to who has legal ownership over a piece of property.  Divorce, death, and debts can cause issues with a property’s title.  Making sure it checks out will protect against any existent unpaid liens.

Word of Advice: Title insurance covers the costs caused by any basic mistakes or errors made in survey interpretation.  GET SOME!

Final Loan Commitment!

Requirements:

  1. A Settlement Statement – outlines the terms of a loan and exact closing costs
  2. Certified Funds – money acquired from a financial institution
  3. Evidence of Insurance – proof you bought homeowner’s insurance

Word of Advice: Pay the first years’ worth of insurance premiums—that counts as evidence!

A Few Reminders:

  • Contact and transfer over all utility and service providers (gas, electric, water, garbage, telephone, cable, etc.)
  • Hire a mover (USE REFERRALS to be sure you make a reliable choice!)

Final Walk Through!

Word of Advice: Be observant, pay attention to detail, and ask yourself if you have all you need to assume ownership.

This is not always a part of a typical closing, but a necessary and beneficial addition.  You should do this a day before closing.  This is when you check for any last minute damage done to the property between contract and closing, and any repairs that you can approach the seller with.  Make sure you have all security access codes, garage door openers, and appliance manuals.

SETBACKS MAY AND WILL OCCUR.  It is rare for a deal to fall through, but the road to the closing table may be a bit rocky.  Nightmares have occurred: a lender pulling out and not financing a deal, a buyer not having enough money, and a seller still having liens on the property.  Also, failing to complete a walk0through can delay closing and any unanticipated alterations in a buyer’s financial circumstances can cancel out a mortgage contract.

Pull Up a Chair: Time for the Closing Table!

Scheduling: When scheduling your closing meeting, consider taking off a day or a half-day.  Also, choose the 20th or 25th of the month, not the last day, just in case something must be addressed last minute before the house can be yours.  If a closing is NOT completed the last day of the month, closing costs increase due to the accumulation of prepaid interest throughout the month.

Guest List:

  • Home seller
  • Seller’s real estate agent
  • Title company representative
  • Attorneys (if one or both parties have them)
  • Closing agent – conducts meetings and confirms all documentation is signed and payments are made
  • Mortgager (you)
  • Mortgagee (lender)

To-Do List:

  1. Finalize mortgage

The following paperwork must be signed:

  • The HUD-1 settlement statement, which covers all costs related to home sale
  • Final Truth in Lending Act, which covers the cost of the loan and annual percentage rate
  • Mortgage note stating the buyer’s promise to repay the loan
  • Mortgage or deed of trust, securing the mortgage note
  1. Pay seller
  2. Pay closing costs
  3. Transfer title from seller to you
  4. Legally record transaction

After closing, your loan is sold by your contracting company to another company to be served.  This WILL NOT affect the loan or interest rate.

Word of Advice: You can get a better interest rate by refinancing: swapping your mortgage.  However, first consider how much money you have paid back already and how long you will remain in your home.  Weigh the savings against the costs before deciding!

STORY TIME: Evelyn & Bruno

Don’t Count Your Eggs Before They’re Hatched!

In the homestretch, with a week-and-a-half to closing, nothing can possibly go wrong, right?  Wrong!  You must remind yourself when you begin the process of house hunting that setbacks MAY and WILL occur.

For Evelyn and Bruno, they were on the right track, with the inspection, insurance policy, appraisal, and survey all being arranged and taken care of.  Unfortunately, they made one giant mistake.  Until the final contract and mortgage documents are signed at the closing table, nothing is set in stone.  They became so focused on buying new stainless steel appliances, deciding what color their son’s room was going to be, and what bedroom set they wanted for their master bedroom, that they let their “MORTGAGE WORTHINESS” dwindle.

The couple had a so-so credit history when they submitted their loan paperwork, but it was good enough that they would qualify for a mortgage policy.  However, once you start buying things on credit, splurging and spending the little cash reserves you had set aside too soon, you are setting yourself up for heartbreak.  Because of this, Evelyn and Bruno were disheartened to receive news five days before they were set to close that they NO LONGER QUALIFIED for their loan.  At that point, they felt hopeless.  Where could they possibly pull thousands of dollars from in such short notice to cover their mistakes?  Any cash they had set aside had been spent.

Mortgage lenders, whether private individuals or bank-affiliated, do a financial check-up to make sure you are a trusty investment.  They are investing in you to help you invest in your future.  Therefore, you have to be conscious of your finances at all stages of the process in order to present them with a package worth investing in.  The lesson here is to do your best to FREEZE your financial status from pre-approval until closing.

It ended up being too late for Evelyn and Bruno to dig themselves out of the hole they got themselves into in such a short time period.  Instead, they ended up remaining in their one-bedroom apartment in Huguenot for an additional two years until they felt their financial status gave them the green light to start another house hunt.  Moral of the story: don’t let their unfortunate story become your story.

CELEBRATE!  Home-buying = Wealth-building

By purchasing your first home, you have made an investment in your future.  A centuries-old truth: New Privileges bring new responsibilities.

Be sure to take everything one step at a time and remember: your real estate agent is just a phone call away.  It is best to establish a stable relationship in which they will share with you their expertise and advice.  Owning your own home means you can decorate it however you choose.  However, it also means you have a responsibility to keep everything in TOP CONDITION, to preserve the value of your investment.  It’s all up to you!

Top Tips:

  • Keep it clean – Routine maintenance is key!
  • Keep on the lookout for signs of leaks, damage, and any wear and tear.  It is best to stay on top of things so you catch minor problems and take care of them before they have time to escalate.

"Fix small issues now, save big money later!

Taking care of your home doesn’t have to be difficult.  It also doesn’t require a lot of knowledge, money, or time, as long as you utilize your warranty and keep cash on reserve to use for maintenance.  Warranty or not, having a maintenance budget will help lighten the blow of any emergency costs that may be flung your way.

Economic circumstances concerning our society make owning your own home seem IMPOSSIBLE for many hopeful young buyers.  However, the word itself says, “I’M POSSIBLE.”  With the right real estate agent and the right knowledge base to back you up, you can find just the right home for your particular lifestyle.