If you think real estate is no longer part of the American dream, think again. Approximately 65% of Americans own a home, and thousands of people purchase property every day.
No matter where you're looking to settle down, homeownership is exciting! Moreover, it's associated with numerous benefits that include enhanced privacy, stable costs, building equity, and having your own space to do what you want with!
That said, the process of buying a house can be stressful! Finding the perfect home in the right location is half the battle. The other half is understanding all the incremental details of closing on a house.
Let's get into what you need to know!
What Does Closing Mean?
You've found your dream home. You're already planning out the interior design, brainstorming small renovations, and imagining the first dinners you'll be cooking in your sparkling, new kitchen. Although things may feel like they're moving fast, you won't be receiving those keys just yet.
Closing refers to the final step of owning the home. In other words, the closing date refers to when you become the legal owner of the property.
Together, you and the seller will negotiate the closing date. The date is listed on the purchase agreement contract after the seller accepts your offer and earnest money.
The agents representing both the buyer and seller will coordinate with the lender to collaborate on a reasonable timeline for the deal execution. Because these things take time, the closing date could be several weeks or months after the seller accepts your offer.
What Causes Closing Delays?
In 2018, the average length of time for closing a home was 41 days. If this seems like a long time, it's because there are many moving parts to consider.
If you make an offer before receiving a loan preapproval, you're assuming that the bank will offer you the loan amount you want. Needless to say, that's not always the case. After examining your finances, the bank may not be able to provide you with your desired loan amount.
Many prospective buyers want to buy a home they can't afford. While lenders will try to accommodate a homebuyer’s dream, it's not always feasible. That's why it's best to receive preapproval before you even begin the house hunt. This will help you know what you can afford.
That said, preapproval doesn't guarantee approval. Mishaps do occur during the underwriting process. For example, if your credit score dropped or your salary changed, lenders might deny approving your loan.
Appraisals determine the home's overall value, but it isn't a straightforward process that you can calculate yourself. Official appraisals take many factors into consideration including:
- visual inspections
- current market trends
- home statistics (square footage, floor plan, upgrades)
- recent sales of nearby properties
- past home sales
Appraisals are objective and unbiased. However, sometimes, appraisal values are lower than anticipated. This can be somewhat advantageous, as it can provide you with bargaining power to convince the seller to lower their price.
Banks do not lend buyers more money than the home is worth. However, some sellers may believe that appraisals are inaccurate, and they will want a second opinion. This may result in you choosing to delay or cancel the transaction altogether.
Home Inspection Issues
The home inspection can make or break buying (or selling) a home, and it can cause issues with the closing process. Nearly all inspections reveal some problems, but only the buyer can determine which ones they want to be negotiated.
For example, significant water damage or electrical wiring problems can cause thousands of dollars in repairs. You may not notice these defects when wandering around the home, but they can put quite a strain on your wallet.
Most contracts have home inspection contingencies. This means that you can mandate that the seller fixes issues or lowers the price in order for you to buy the home.
Neighborhood and Walkthrough Issues
Many people check out a home on lazy weekend afternoons. The problem? That's when neighborhoods seem quiet and ideal to live in.
But what does the community look like at 5:00 pm during rush hour? What about at night when everyone is asleep? When you visit a home, you also visit a neighborhood, and it's imperative that you feel comfortable there.
Walkthrough issues may also arise. Upon scrutinizing the home for the final time, you may notice particular damage or changes. Addressing these issues can require effort and negotiation – both of which can cause purchase delays.
Walkthroughs aren't the same as inspections. They don't provide the same bargaining power for negotiations. That said, this walkthrough ensures that the home is in the condition you agreed to buy it in.
You will do your walkthrough either a few days or hours before closing on the home. Even if you're in a time crunch, don't miss this opportunity. Make sure to adhere to the following checklist:
- turning on and off all lights
- checking the garage door openers
- flushing toilets
- checking all water sources
- testing all major appliances
- inspecting ceilings and walls
- checking floor conditions
- opening and closing all doors (both inside and outside)
- opening and closing all windows
- testing the garbage disposal
- testing air conditioning and heat
Home inspections rule out structural and cosmetic problems. They ensure that you're getting a quality home.
However, you can't close in on a home until any agreed repairs are complete. Unfortunately, sellers may neglect or forget to get things fixed by the closing date. Likewise, contractors may not finish on time, which could delay the process.
If you think you have to sign a lot of paperwork when you get a new job, just wait until you close in on the house! Real estate paperwork is extremely lengthy, and it can be time-consuming.
As a buyer, it's critical that you understand all the legalities. Don't just enter your initials and sign at the bottom without being careful and thorough. Remember that your agent can explain you everything you need to know in layman's terms, but if you still have any questions you need to ask for clarification.
When you buy a new home, you receive a title in your name. However, delays can occur. There may be problems with the title itself, such as unknown liens or other past mistakes.
Both minor and major issues may take time to resolve. It's essential to be patient if this happens.
Understanding Closing Costs
All home transactions have closing costs. These costs refer to the third-party fees associated with buying a home. They vary, but they typically include charges related to:
- home inspection costs
- appraisal fees
- attorney expenses
- credit report filing
- homeowner’s insurance
Typically, you should expect to pay anywhere from 2-4% in various closing costs. Your lender will send you a Closing Disclosure at least three business days before closing. This form will outline all the associated costs you are responsible for paying.
You must assess each charge and compare it to your original loan estimate. You want to see if there have been any edits or changes. If modifications have occurred, you need to discuss them with your lender.
Soaring Through Closing Day
It's here! Closing day! It may be one of the most exciting days of your life, but it can also feel somewhat nerve wracking. That's why it's vital that you feel prepared for what to expect in advance.
Your closing appointment might include several different people. Depending on your state and the circumstances of homeownership, these people may include:
- the seller
- the escrow/closing agent
- mortgage lender
- buyer's real estate agent
- seller's real estate agent
- title company representatives
When you arrive at your closing appointment, you'll need your photo ID, loan paperwork, and the cashier's check payable to the title or closing company.
You'll pay your remaining closing costs and sign the following documents:
- a settlement statement outlining the costs associated with your home sale
- mortgage note with your indication to repay the loan
- the mortgage or deed of trust
- a new deed in your name
You'll want to make sure that you place all these documents in a secure location like a fireproof safe.
Final Thoughts on After Closing on A House
After closing on a house, it's time to move into your new home! Embrace and enjoy this exciting experience. This change is something you won't ever forget.
Are you still in the planning stages of buying your new home? Our agents are here to help you every step of the way. Search the top realtors in your area today!