By: G. M. Filisko
This cheat sheet helps you do your homework, so you know what you're signing when you close the sale of your home.
You've already cleared several hurdles by finding the right home, negotiating the best price, and getting approved for a mortgage. The last obstacle on your home-buying track is the closing, which can be both tedious and tense. By knowing what to expect and doing some legwork, you can smoothly put your closing behind you. These seven steps will guide you.
1. Set a Closing Date
Ask your title company to set a closing date and time that meshes with the end of your lease or the sale of your existing home. Don't want to skip work? Ask for an evening or weekend closing. Tight on cash? Schedule your closing for the end of the month. That's when you'll pay the least amount of interest at the closing table.
2. Gather Your Funds
Buyers usually have to bring money to the closing. Ask the title company what forms of payment it accepts. Chances are you can't use a personal check.
If you have to move money into your bank account to pay your closing costs, do so a week ahead to avoid last-minute problems. If the title company requires the funds in the form of a cashier's check, stop by the bank a few days before closing to pick it up.
3. Purchase Title Insurance
If you're getting a mortgage, you have to buy a title insurance policy. Think it protects you against problems with the title of your home? Nope, it protects the lender in case the sellers really didn't own the home or someone else had a claim on it.
To cover yourself, you can buy an owner's title policy from the same insurance company that sells you the lender's title policy. Or, shop online at Closing.com, EasyTitleQuote.com, or FreeTitleQuote.com. An owner's title policy insures you against losses from fraudulent claims against your ownership and errors in earlier sales. In some areas, sellers traditionally pay for the buyer's title policy.
Whether or not you get the owner's policy, if you buy a title policy from the same company that issued the prior owner's title insurance, you can ask for a reissue discount or "bring-down" rate. There's a discount because the title company only has to check the records filed since that prior owner bought the home, not since the dawn of time.
4. Line Up Homeowners Insurance
Get quotes and compare policies to be sure coverage will start by your closing date. An annual policy should run $500 to $1,000, depending on your home's size, age, and amenities. To get a lower premium, opt for a high deductible or buy your homeowners insurance from the same company that insures your car.
If you live in an area where natural disasters occur, like earthquakes, floods, or hurricanes, you'll need separate insurance to protect your home from those hazards.
5. Review Your Good Faith Estimate and HUD-1 Settlement Sheet
Your lender already gave you a Good Faith Estimate (GFE) that showed your estimated closing fees. Some of the fees on your GFE can't change and others can rise by 10%. Before you go to the closing, compare the numbers on your GFE with the numbers on your HUD-1 settlement statement. Question your loan officer about any fees that increased.
6. Do a Walk-Through
Schedule an appointment to walk through the home one last time just before your closing.
- Make sure repairs you requested have been made.
- Look for major changes since you last viewed the property.
- See if the sellers left everything they promised to leave.
- Check to see that the sellers took all their personal belongings.
- Test electronics and appliances to ensure they're still working.
- Turn on the HVAC and hot water. Are they functioning right?
- Walk the yard to be sure no plants or shrubs have been removed.
7. Resolve Issues Identified in Your Walk-Through
If your walk-through uncovers problems:
1. Delay the closing until the seller corrects them (if your state allows it). But that's often not feasible because your lease is probably over and you've already scheduled movers.
2. Negotiate a discount to your sales price to cover the cost of the work needed. If the air conditioning is on the fritz and a contractor says the repair will cost $500, ask that the sales price be reduced by that amount. If you make that request at closing, however, be ready for a delay while the title company redoes the paperwork.
3. Have the title company hold a portion of the seller's proceeds in escrow until the dispute is resolved. Once that happens, the funds will be released to you or the seller, depending on the outcome.
G.M. Filisko is an attorney and award-winning writer who has endured several property closings, but the easiest was done through the mail. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.
For help with your Real Estate needs in Maryland please contact Audrey Romano at AudreyR@LNF.com or 301-466-9552.