Closing on a House is like Making Dinner

By Melissa S. Monroe

The countdown has begun for you to move in to your new house and lay down the welcome mat, but before the excitement sets in, you still have to go through the dreaded closing steps.

When it comes to closing, there are a series of steps you must do before you can park your car at your new place. Just like making dinner, before you can enjoy your meal, you must prep and plan. While every state may have a different closing procedures, most lenders will choose a title company to help buyers during the closing process. If buyers feel along or need an extra layer of support, buyers may want to hire an experience attorney.

Prep and Planning:

Pre-approval – Before searching for your new home, you should go through the pre-approval process for a loan to show sellers you are ready to buy. Most sellers have their houses on the market because they are ready to move on. The last thing they want to wait on are buyers who are not serious.

Earnest money – Once you find your dream house, buyers will often put down earnest money (deposit) to let sellers know they are genuine. This money is held in and escrow account, which is like a a holding place for other fees and payments, such as taxes and insurance.

Home inspections – After watching a flip that house episode on TV, you may be tempted to buy a home without any inspections. If this is the case, you must have money to spend! Buyers should get home and pest inspections to detect structural damages or termite issues. Knowing how much you will have to spend to fix the roof, is something you can negotiate with the seller to pay for before signing the final documents.

Appraisal value – Along with inspections, buyers should pay for an appraisal report on their new home in order to make sure it’s worth what they are paying for. You may not want to get a loan for $300,000 when the value of the home is estimated to be $250,000.

Title search – A title search (often conducted by your title company) should be done on your new home prior to closing. This is to ensure no one else can claim your house is theirs. If there were prior owners to your new home, buyers should opt for a title search.

Homeowner’s insurance – Buyers should shop for this insurance prior to closing. Most lenders will incorporate the cost of the insurance in the escrow account.

Signing the Documents/Time to Eat:

Signing title and loan documents can be daunting, but much of the work should have been done in the planning/prepping stages so there are no surprises in this phase. At this point, buyers should make sure everything is what they were promised. For instance,

Taxes – If buyers are paying county or city taxes, they should already have a good idea of what to expect what their monthly payment will be. Most traditional home loans work in the principal (payment on the home loan), homeowner’s insurance, as well as taxes. So instead of that monthly payment being $500, it’s now $1,000 with all the added fees.

Interest rate – Again buyers should know what their interest rate will be, but make sure loan documents have it down correctly and there are no fees for paying early.

Junk fees – Hopefully buyers asked their lenders what are all the extra fees they will have to pay to process the loan – administrative and ancillary fees. Smart buyers should know what are the typical fees other buyers pay in their area.

Keys – Once you have signed that last document, the next sound you should hear are the jingling of the keys to your new home.