Navigating Your Real Estate Close – Forbes Advisor
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Closing day is the culmination of a week-long process that can include financial dramas, tense negotiations, and lots of conversations with real estate professionals, lawyers, and mortgage lenders.
Here’s a guide to navigating what happens after you sign the sales contract to the day you get the keys to your new home – or complete your mortgage refinance.
What is a real estate deal?
A real estate deal is when you complete the paperwork for buying your new home or finalizing your refinancing arrangement. Once the paperwork is complete, you are the homeowner and responsible for the contents of any document you sign, including an obligation to pay the mortgage payments for the life of the loan.
While federal law provides a right of withdrawal for those willing to refinance – until midnight on the third business day after the transaction to cancel the mortgage – there is no such provision for new home purchases. Once you have signed the documents to buy a new house, they are official.
Upon closing, buyers sign a variety of documents that formalize their commitment, setting out their rights and obligations. In addition to discussing the paperwork with your real estate professional, lender, and / or attorney, you can view templates for some of the key documents on the Consumer Financial Protection Bureau’s website, including the promissory note, mortgage deed, and initial escrow disclosure. The documents cover the agreements between the buyers and sellers and the buyers and their lender.
Here’s how to prepare for your degree
The closing process consists of several phases that can take several weeks to complete. According to the Ellie Mae Origination Insight Report, the typical closing time after mortgage application in July 2020 for all types of mortgage loan was 44 days. This period of several weeks allows buyers to complete the financing, review the property with professionals and possibly negotiate new terms. The closing process is much faster for those paying with cash, possibly even a week, if all buying risks are removed.
Here’s a look at the stages of the closing process that lead up to real estate closing.
1. Signing the sales contract
The closing process begins when you agree on a selling price with the seller and sign a sales contract. The sales contract becomes the most important document in the closing process as it sets out the conditions of sale, including:
- The timing of the closing process, including deadlines for various steps
- This is how the purchase is financed
- What contingencies are there in the contract, e.g.
If you have already received a pre-approval letter from your preferred lender within the last 90 days, you can work with the lender to finalize the details of the loan and include them on the document.
2. Complete financing
Once you’ve given the lender details of the home you want to buy, the next step is to get a mortgage approval from the lender, who may need more financial details, to share with the company’s credit insurer.
When you receive a letter of commitment, review the terms, which include the amount of the monthly mortgage payment and the escrow account, if any. This is likely to happen when you set your interest rate or given a deadline to do it.
Note, however, that the commitment will likely be conditional and have a set time frame in which to finalize. For example, the buyer must do the following:
- Get a home inspection
- Maintaining the same or similar income or credit scores; If a buyer loses their job or makes a major purchase – such as a car or other home – the application could be jeopardized
- Ensure the deposit is met
The final commitment will be issued shortly before the closing and confirm that the loan offer is final without any conditions.
3. Full ownership and title check
During the closing process, the property undergoes a comprehensive review, both physically and legally, and the results could easily confirm, complicate or terminate the purchase agreement:
- Appreciation. One of the first steps the lender will take after signing the sales contract is to make an appointment for an appraisal. A professional appraiser, who is an independent third party, creates an estimated value for the property. If the value equals, or is very close to (which is usually the case) the agreed selling price, the loan is likely to go on.
- Home inspection. The buyer pays for a home inspector to review the property and identify any problems – major and minor – that may need to be fixed. Typically, the buyer and seller make an agreement about what the seller will fix before the buyer moves in. However, when that is not possible, most sales contracts contain a home inspection hazard that will make the buyer walk away. You may also want to do a pest inspection or ask the seller to arrange a pest scan to make sure there are no major issues, such as a termite infestation.
- Title search. Since the sale of a home is the transfer of ownership from one person / entity to another, condos will do a search prior to the closing date to make sure that any problems with the property, such as problems with the property, such as problems with the property are closed. B. a lien are resolved.
Your checklist for closing real estate
As you near your graduation date, here are a few things to prepare for the big day:
- Hire a lawyer. If you don’t hire a lawyer for the early part of the process – such as negotiating and reviewing the sales contract – you’ll want a lawyer to do the closing to make sure your interests are represented. Check with your real estate professional and / or lender early to find out when and why you need one and if they have any recommendations.
- Check your loan. You will receive a closing statement from your lender three days before closing or sooner. This is your chance to check the loan amount, interest rate, amount required for down payment and other important information before the closing date. Contact the lender ASAP if you have any concerns or questions. For more information, see the Consumer Financial Protection Bureau’s interactive Closing Disclosure Tool.
- Determine how you will pay the closing costs. You’ll need a cashier’s check to cover closing costs or records showing that you sent the money by wire transfer. Buyers pay 2 to 5% of the purchase price in closing costs, which may include subscription fees, including appraisals; title-related costs; Lending points; Mortgage insurance premium (if necessary); Legal fees and premium for home insurance
- Gather the rest of the documents. If asked to do so, you should provide proof that you have taken out home insurance for the property, but you should also have the following on hand: Government-issued photo identification; a copy of the sales contract; important credit documents, such as financial statements disclosure, in case you need to review them when signing the closing documents and any pre-signed documents
Make sure you do one final tour of the property within 24 hours of closing. You want to make sure that the problems found during the home inspection are fixed – as agreed with the seller – and that everything else is in order.
Who has to be there when you close your real estate deal?
Technological advances and the coronavirus have changed the way closings take place, with some of them occurring remotely or with just a few people. If you have more time, the closure can be done by email.
Your real estate agent, as well as a representative from the title company who will verify your identification against the contract information, will likely attend, as well as your attorney. The sellers can also be there or a lawyer to represent them.
Why Your Property Closure May Be Delayed
Closures can be delayed for a variety of reasons, some of which are under the control of the buyer and some of which are caused by the seller, lender, or others.
Buyers have some degree of control over the loan process, as long as they provide the lender’s required documentation, such as income statements and tax documents, as soon as possible. You can also ensure that an inspector visit is arranged as soon as possible so that there is enough time to negotiate possible repairs with the seller.
However, if the lender has a backlog of applications and cannot schedule closings quickly enough, there may be delays. It is important that buyers know that they can try to renegotiate a free or discounted rate fixture extension with the lender if it expires before closing.
Buyers can also cause problems if they change jobs during the closing process and / or their income levels are negatively impacted. The lender may take additional time to look at the new employer to make sure they get that much income.
Throughout the closing process, buyers must be in constant communication with their real estate professional, lender and, if necessary, attorney to ensure that the requirements set out in the sales contract are met.
The best way to avoid drama in the closing process is to get the things you can control right and quick, and to be as prepared as possible for any unexpected situations that may arise.