Did you know that roughly one million people purchase a home every year? Purchasing your first home is a huge rite of passage for many adults. However, despite this fact, many new home buyers are unfamiliar with what the home closing process looks like. Sadly, this can lead many of them to make serious mistakes that can impact them for decades to come. So, to prevent this from happening we made this article to show you what the closing process looks like in practice. That way, you can get the home of your dreams without any negative loopholes. Let’s get started!
1. Consider Mortgage Pre-Approval First
Technically, you don’t need to be pre-approved on a mortgage to purchase a home. However, these days it’s become commonplace for buyers to have a pre-approval letter before they start looking for homes. This has a couple of advantages. For one thing, it makes the process much quicker. It also gives you more bargaining power when you get down to the negotiating phase.
Finally, it lets you know your borrowing limit when looking for houses. The last thing you want is to find the perfect house, only to realize that you can’t afford it. Make sure to check out these vendors if you want to learn more about this process.
2. Start an Escrow Account
The home closing process involves a lot of steps, money, and personal documents being exchanged. Because of this, it’s important to have a neutral third party that acts as an unbiased mediator between the buyers and the sellers. That’s where escrow accounts come into play. This is a neutral third party that holds the documents and money until the deal is finally settled upon.
Once all the formalities are out of the way, then the escrow account returns the money and the documents to the buyer and seller.
3. Think About Hiring an Attorney
It’s almost always a good idea to hire an attorney to review your closing documents when buying a house. In fact, in some states, it’s legally required. This is vital because there’s a lot of technical jargon in these documents. As such, even if you read everything cover to cover it can still be easy to miss something. Your attorney will also ensure that the seller has important documents, like the title of the property and the title insurance.
Without these documents, someone else can claim the house later on.
4. Negotiate on the Closing Costs
Anyone who’s closed on a house knows about closing costs. These are costs for services (some necessary, some not) that are involved in closing a deal. If you aren’t careful, they can quickly spiral into thousands of dollars. Here are some of the popular types of services that you will likely need to pay for:
- Opening an escrow account
- Hiring an attorney
- Administration fees
- Application fees
- Appraisal fees
- Processing fees
- Ancillary fees
- Settlement fees
Because there are so many to keep track of, all of these expenses are often labeled as junk fees. The good news is that if you speak up then it’s possible to negotiate out of a lot of these junk fees. Just make sure that you stand your ground.
5. Get the Home Inspected
You never know what the sellers might be trying to hide from you. As such, you must perform an inspection on the property before you proceed with the closing. This involves hiring two professionals. One inspector to check all of the major systems and structures found in the house. And, another to search for potential pest problems.
If you discover a problem, then you might want to back out depending on how severe it is. However, if it’s not a deal-breaker, then you can use this to negotiate.
If you discover repairs that need to be made to the property, then it’s time to renegotiate. Typically, this involves lowering the price of the property. However, you can also try asking the buyers to keep the price the same and make the repairs themselves.
7. Lock in an Interest Rate
Interest rates are often subject to change throughout a mortgage. Many things can influence these changes. However, some of the popular ones include geographic, property types, and credit score factors. As such, we recommend getting a mortgage that allows you to lock in an interest rate at the beginning. That way, market fluctuations won’t cause you to owe a lot more money than you did at the start of the mortgage.
8. Do a Final Walk-Through
Before you sign on the dotted line, it’s important to do one final walk-through on the property. This is to make sure that any repairs you requested were properly honored. You should also check and make sure that it includes everything that was included in the initial purchasing agreement.
9. Go Through the Paperwork
Before you sign the papers you must go through them one last time. Even though the papers are filled with complicated jargon, this is still important. One small detail can cause huge impact years down the line.
If you don’t understand something, then make sure to bring it to a real estate attorney to explain it to you. If you find anything that you think is illegitimate, then dispute it immediately.
Enjoy Learning About the Home Closing Process? Keep Reading
We hope this article helped you learn about what the home closing process looks like. We know that the closing process involves a lot of boring tasks. Ultimately it will involve reading a lot of dry, legal papers.
However, as long as you take it seriously, and you hire the appropriate professionals to help you, then you should be fine. Did you enjoy this article? If the answer is yes, then you’re in the right place.
Keep exploring to find more topics that you’re sure to love.