9 Pre-closing Tips for First Time Home Buying
As your realtor, I’ll help you to prepare the best offer for your first home. But what happens after your offer is accepted? First time home buying can be overwhelming.
Your offer will most likely contain a list of contingencies (for example, any disclosed problems and remedies, results and actions after the inspections, etc.) and it is finally accepted.
Anticipation of a purchase is rising. You are ready to sign the documents and move into your new family home, loft, or condo, as soon as possible.
Although, it is too early to pack your boxes just yet. A little journey awaits, and there are nine steps to take before you own your property.
Closing Tips and Considerations
#1. Lock-In the Interest Rate
You need to lock your interest rate from the time a loan application begins approval until a couple days before the closing.
Exact day and time is up to you. Most of the buyers do not lock the interest rate when they apply for their mortgage.
They are afraid the rates will decrease during that window of time. Nevertheless, chances are that the interest rate may both increase or decrease during that period.
A lot of variables should be considered. Waiting till the last moment could get you a lower rate at the same time, if you get lucky. The decision is yours to make, just do it in time.
#2. Perform a Home Inspection
Making sure that tiles won’t fall off on the first day in your new home is generally a reason to have a home inspection.
Specialists will check the conditioning system, plumbing, and electricity. Choose your inspectors wisely, and do not fall for the cheapest option. Cheap usually proves to be a bad choice in terms of quality, experience and technical knowledge. I’ll provide with several reputable inspectors to choose from.
Of course, even the most expensive professionals cannot foresee the future. But they may save you thousands of dollars uncovering existing issues.
Even new houses need to be checked dutifully and thoroughly. It does not matter that the house recently had all the require city inspections by the builder.
#3. Have a Pest Inspection
The best choice is to hire a licensed pest inspection company. They will check if your future property is contaminated by flies, mosquitoes, cockroaches, fleas, rats, mice, bed bugs, termites, beetles, critters, carpenter bees, ants, and other types of pests.
They will also check mold growth and other possible environmental health threats caused by lead, fungus and asbestos.
There is no need to explain how much harm even a small amount of termites may bring. Not to mention the potential harm a growing mold population can cause, as they tend to cause major damage. These issues will lead to major fixing expenses and health issues.
Presence of any kind of contamination is a subject of renegotiation of terms, or a reason to rethink the deal completely.
#4. Fix all the Issues after the Inspections
If inspections reveal any problems, you may want to drop the price, or ask the seller to fix the problems that came up.
Some inspectors advise to look deeper into the issue. They say you should ask for a second opinion, or evaluate it further with a specialist.
It is highly recommended to discuss the estimates and fix the issues as soon as possible.
#5. Ask for Title Search and Insurance
Title insurance is needed to eliminate the third party ownership on the property that you are buying. If mortgaging the home lenders will most certainly require a title search and insurance.
The officer will help you make a title search and make sure that there are no legitimate claims from relatives, collectors, and the like. Such claims might end in questioning your right of possession, or invalidating it at all.
Title insurance will become a legal proof that everything is clear and you are good to go further with the closing.
#6. Conduct a Home Appraisal
A home appraisal determines the estimated market value of your soon-to-be property.
The appraiser evaluates it based on different factors. These include general condition, geographic location, proximity to objects of interest, value of the near-by houses, their recent sales, neighborhood growth and potential.
Mortgage lenders usually need this information to make sure the amount you would like to borrow is worth the money. There is always a risk of a low appraisal. This might not be bad for you as a buyer.
But imagine this scenario, you negotiated a deal with the buyer, and it is already lower than he initially wanted. This is due to the declining market and neighborhood constructions. This will cause the home appraiser to drop the value even more.
You cannot disagree that it may slow down the closing process. This is due to the seller’s doubts, if the appraisal is fair, or if he really wants to sell at a price that low.
At the same time, you as a buyer want to save and you have a legitimate right to go for it. Same goes with high appraisals, which will stop you as a buyer and make you want to appeal.
And both of you will be right in standing your ground. Such a possibility may lead to a delay and require new negotiations.
Unfortunately, some appraisers are not qualified enough, or unfamiliar with all the specifics of the particular areas.
Before trusting the home appraiser with this responsibility, make sure he is from your county, has a residential appraiser certification and a professional designation.
#7. Set the Time and Date of the Closing
There are several moments to consider when scheduling the closing for your property.
One of them is to schedule at least half a day’s time for the occasion. An hour or two may not be enough if you face some unsolved issues or unexpected situations.
Closing will be held in any agreed location. For example, at the attorney’s office, or at your lender’s or title company’s offices. The closing date should be close to the end of the month, but not the last day of the month.
It is better to settle between the 20th and 25th of the month. In this case, you will have some time before the end of the month to resolve all the disputes.
Why not the last day? There are a few reasons. These include wanting to renegotiate new conditions, technical issues or something going wrong.
If you schedule a closing and fail to complete it on that day, there are consequences. You will face increased closing costs next month, in addition to the penalty for the delay.
#8. Be Present at a Walk-Through
A final walk-through is a last chance to see your future house before you buy it.
Usually we will schedule twenty-four hours before the closure.
The property should be in the condition that is specified in your sales contract. You may inspect if any changes are made after the home or pest inspections. Check if everything is in order and if any additional replacements are necessary.
If there is an issue, the closing day may be shifted. Or upon mutual agreement, the repair costs will be submitted to the escrow account. Do not skip it because missing the final walk-though is one of the reasons of closure delay.
#9. Get Ready for your Closing Day
Now you’ve run the escrow marathon and survived all the possible obstacles in your way. It is finally time to sign the papers and get the keys to your new home.
First of all, prepare all the paperwork that you have collected during the whole process. This includes the title search and insurance, inspection reports, bank statements, home appraisal, checks of down payment closing costs, prepaid interest and anything else.
There will be quite a few people present with you at the closing, your attorney, a seller (and/or his representative), the seller’s attorney, real estate agents (both yours and your seller’s), a lender’s representative, a title company’s representative, the closing agent, and a public notary.
Basically, the purpose of the meeting is to sign the following documents:
· Closing Disclosure (CD). This document contains your final payments, costs and charges upon agreed terms and periods.
You are to receive disclosure three business days before the closing date and compare it with the conditions of the initial loan estimate.
· Mortgage note.
Signing this document, you agree to your mortgage terms and conditions, as well as penalties, in case you are not able to pay duly and in time.
· Deed of trust or mortgage.
It is a security for your lender that he will get his money, even if you are unable to obey the terms of the mortgage note.
· Certificate of occupancy (for new houses only). You’ll need such document prior to moving into a house.
As the leader of your home buying team, you will not be seeing these documents for the first time at the closing. I’ll will have provided them to you ahead of time. However, do not sign anything that is unclear to you, different from what you agreed to, or seems wrong.
Make sure that you understand what you are signing and how your payments will be distributed over the time. Payments vary depending on the mortgage type, insurance, and taxes.
Risks and Delays on a Closing Day
Even a well prepared closure may not go as planned. Some mistakes can be revealed during the signing of the documents.
There are a few examples of how this might happen. If you or your seller’s financial circumstances change or if one of you changed your last name during marriage. It is possible some of the repairs were not considered, or one of you simply backs out from the deal. Everything is possible, and you have to prepare for every option.
If either of you refuse to sign the deal because you changed your mind, or found a better option, the other party has right to collect the damage fees. This clause is usually obligatory in all the agreements.
Closing a deal is a big responsibility, stress and financial risk for all parties involved. It is important to understand that, especially if you are doing it for the first time.
You need to do your research and gather all necessary documents. You must also follow your attorney’s, inspectors’ and real estate agent’s advice. Not to mention, you have to be sure that you definitely want to close this deal.
Then calm down and take a deep breath. Now you can go through with it!
After you Sign the Papers
Take the keys and start moving into your new house. Now you are a legitimate owner and a responsible person for a mortgage loan.
Closing on a first new home is mind blowing – both in a good and a bad way.
Nothing can compare to buying your first home. When you finally get through with it, you will be able to relax and enjoy your new property.
Hopefully, these basic steps will help the first time home buyers handle this incredible process with less stress and more energy.
Congratulations on buying your first home!
Craig is a native Kentuckian and has called Lexington home for 30 years. He is a licensed REALTOR affiliated with The Jury Group. While he has been involved in many aspects of residential, commercial and investment real estate. Being a REALTOR is a second career. Previously he has owned a successful Information Technology business where he owed his success to delivering high levels of customer service, moving fast, working with immense integrity, and creating win-win transactions. When not creating real estate transaction of value, Craig enjoys cycling, traveling with his black lab, blogging, photography and videography.