Before the Closing
As overwhelming as this process can be, you can prepare for a real estate closing by understanding what needs to happen before the closing. This will make the whole home buying process much easier and less stressful on you and your family. Some of these items may seem obvious, but we have included them to make the list as comprehensive as possible. In fact, it may be easier for you to simply print out this list and check each item off as it occurs.
Pre-Settlement Checklist
Loan Approval
This is the most crucial part of the process (unless you are paying cash for the property), because you can’t have a closing until you get approved for a loan. Once you are approved for the loan, the settlement process may begin. Often, prospective sellers would like to see that a buyer has been “pre-approved” for a loan from a bank or mortgage broker, so be sure to get a pre-approval letter from your lender prior to signing any real estate sales contract. Also, it is at this point that you will want to indicate to your lender that you would like to use Rounsavall Title Group to conduct your closing. Remember, you have the right to choose which company will close your loan, and you will surely want a group as experienced as ours to handle it the right way. If you need a referral to a local bank or lender, please feel free to contact us.
Sales Contract
This is the document that establishes the terms of the transaction between you and the seller as to what needs to happen to get the property transferred. The Contract sets forth items such as the purchase price, the amount of your earnest money deposit, what appliances will be left behind on the property, whether the seller is to cover any of your closing costs, and so on. It is at this stage of the process where an experienced realtor is very beneficial, because they will be able to negotiate terms that are most favorable to you. Again, if you are in need of a local realtor to help you, please feel free to contact us.
Good Faith Estimate
After the execution of the Contract, the lender will give you a package of documents, which will include a “good faith estimate”. These documents show you the terms of the loan that the lender is willing to extend to you, including the total estimated costs of the loan (or “closing costs”), interest rate and payment terms. Prior to the date of the closing, the lender should inform you of the approximate amount of funds you may need to bring to the closing, which is often close to the figure quoted within the good faith estimate. But please remember that a good faith estimate is merely an “estimate”, and may not include some items that appear in the final calculation, such as owner’s title insurance, homeowners dues, adjustments to the pre-paid interest, funds needed for your escrow account and other fees.
Home Inspection
This is a non-invasive examination of the condition of the house, which should only be carried out by a licensed home inspector. This is often done within a short period of time after the signing of the Contract, and, under the terms of the Contract, there might be a defined period of time in which this may be done. A home inspector will check everything from the roof to the basement to determine if any of the internal systems or structure requires maintenance or repairs. A home inspection report is then issued by the home inspector, and it is at this point where a buyer will submit a list of repairs (if any) to the seller. The inspection is important, for it will let you know whether your dream home is worth buying at all.
Hazard Insurance
All lenders today require hazard and liability insurance on your home, and that it be in effect for no less than one (1) year from the date of closing. You should know that as long as the policy issued meets the lender’s minimum requirements, you are free to use whichever insurance company you wish to issue the policy. It should be noted that the lender will need to be provided proof of this intended coverage prior to the closing, and this must show the lender as the loss payee.
Set the Date of Closing
The date and time of the closing will be set at a time that is suitable to both the lender and the parties to the transaction. If either you or the seller are represented by a real estate agent, the agent will normally take the lead in determining what time is best for all parties.
Transfer Utilities
Make sure to call all applicable utilities (gas, electric, etc.) to be transferred into your name effective as of the date of the closing. This is very important, as most sellers have coordinated with these same companies to have these same utilities cut off immediately after closing.
The Final Walk-Through
A day or two before your closing, you will conduct a final walk-through of the property. This is your last chance to view the property before taking ownership, so it is important to note that everything on the property is precisely as it was when the contract was signed (no new damages, all conveyed items present, etc.). Also, if the contract was contingent upon the completion of certain repairs by the seller – based on the results of the home inspection – be sure to those repairs have been completed.
Settlement Statement
Prior to the closing, you should receive a HUD-1 Settlement Statement (also referred to as “the HUD”). This document is a simple accounting ledger that lists all of the costs you’re required to pay at settlement. Please review it carefully, and if you find any errors or items you don’t understand, bring it up with your real estate agent, attorney or our office.