Do you know what you need to do before closing on your home? Make your list and check it twice with these tips!
1. Get all contingencies squared away
Most purchase agreements have contingencies—things that buyers must do before this transaction is official.
These are the most common contingencies:
Home inspection contingency: This gives buyers the right to have the home professionally inspected. If something is wrong, you can request it be fixed or you can back out of the sale. It’s rarely advisable to waive an inspection contingency. Although the average home inspection costs $300 to $500, it’s a drop in the bucket considering the costly home issues you might uncover.
Appraisal contingency: With this contingency, a third party hired by your mortgage lender evaluates the fair market value of the home. If the appraised value is less than the sale price, the contingency enables you to back out of the deal without forfeiting your earnest money deposit.
Financing contingency: This contingency gives you the right to back out of the deal if your mortgage approval falls through. You have a specified time period, as stated in the sales contract, during which you have to obtain a loan that will cover the mortgage.
2. Clear the title
When you buy a home, you “take title” to the property and establish legal ownership—a process that’s confirmed by local public land records. As part of the closing process, your mortgage lender will require a title search, and you’ll need to purchase title insurance to protect you from legal claims to the house.
3. Get final mortgage approval
Before you can go to the closing table, your home loan must go through the underwriting process. Underwriters are like real estate detectives—it’s their job to make sure you have represented yourself and your finances truthfully, and that you haven’t made any false or misleading claims on your loan application.
The underwriter—employed by your mortgage lender—will check your credit score, review your home appraisal, and ensure your financial portfolio has remained the same since you were pre-approved for the loan.
Since underwriting typically happens shortly before closing, you don’t want to do anything while you’re in contract that’s going to hurt your credit score. That includes buying a car, boat, or any other large purchase that has to be financed.
4. Review your closing disclosure
If you’re getting a loan, one of the best ways to prepare is to thoroughly review your closing disclosure, also known as a HUD-1 settlement statement. This official document outlines your exact mortgage payments, the loan’s terms (e.g., the interest rate and duration), and additional fees you’ll pay, called closing costs (which total anywhere from 2% to 7% of your home’s price).
You’ll want to compare your closing disclosure to the loan estimate your lender gave you at the outset. If you spot any discrepancies, ask your lender to explain them.
5. Do a final walk-through
Most sales contracts allow buyers to do a walk-through of the home within 24 hours before closing. During this stage, you’re making sure the previous owner has vacated (unless you’ve allowed a rent-back arrangement in which they can stick around for a period of time before moving). You’re also double-checking that the home is in the condition agreed upon in the contract. If your home inspection revealed problems that the sellers had agreed to fix, you’ll want to make sure those repairs were made.
6. Bring the necessary documentation to closing
Make sure you have the following items when you head to the closing table:
Proof of homeowner’s insurance
A copy of your contract with the seller
Your home inspection reports
Any paperwork the bank required to approve your loan
A government-issued photo ID (Note to newlyweds who just changed their name: The ID needs to match the name that will appear on the property’s title and mortgage.)
Plan to sign a ton of paperwork. An attorney or settlement agent will guide you through the process. When you’re done, you’ll collect the keys and you’re finally home free!
Content shared from realtor.com