While some places refer to closing as a “settlement” or “escrow,” it is essentially the same pivotal moment when all parties meet to transfer ownership of a home from the seller to the buyer. So what can go wrong that can hinder this process from being a smooth ride? A lot, if you’re not prepared. We are going to go over what steps you can take to avoid any last-minute hiccups so you can officially cross the finish line and move into your new home.
Be Mindful of Your Credit Score
Even though you were probably approved for a mortgage a month or earlier, changes to your financial profile can negatively affect your credit score and consequently, lead to complications at closing. Changing jobs, applying for a credit card, buying a car, falling behind on paying bills, or even getting sudden infusions of cash can red-flag your deal.
Your lender could increase your interest rate or potentially even withdraw your loan offer if your credit score drops. So you should avoid making any sudden financial moves in the weeks leading up to closing.
Review Your Closing Disclosure Form
You will receive a closing disclosure from your lender a few days before closing. This document outlines your exact mortgage payment, loan terms, and what you will pay in closing costs, which run anywhere from 2% to 7% of the home’s sales price.
When you receive your closing disclosure compare the information on it to what is on your loan estimate. Don’t hesitate to ask your loan officer to explain any discrepancies.
Get Title Insurance Squared Away
when you buy a home, you are taking the title of that property, which means you become the rightful owner. This ensures that no one else can claim full or partial ownership of the home in the future. This element is not only important to you, but to your lender. This is why it will require that a title company conduct a search of public records for any long-lost heirs insisting the property is theirs, liens (from contractors who worked on the home but were never paid), or any other problems.
Bring the Necessary Documentation
When you go to closing, make sure you have the following items:
- Proof of homeowners insurance
- A copy of your contract with the seller
- Your home inspection reports, anything 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.)
Get Ready to Sign a Lot of Paperwork
Be prepared for a hand cramp. Your signature will be needed on a stack of legal documents, including forms for transfer of title, deed of trust, bill of sale, and transfer tax declarations. You should expect to spend at least 1-2 hours for closing. Once you are finished you will receive copies of all the paperwork and the keys to your home!
Determine Your Mortgage Payment Plan
Your closing costs typically include your first month’s mortgage payment, meaning you have a little time to plan how you are going to make your future payments. You will receive a payment coupon book (either at closing or in the mail shortly after), which you and use to pay your mortgage premiums by snail mail if you choose or you can pay online. If you want peace of mind that you’re not going to miss a payment you can set up automatic payments.
