8 Tips to Prepare for the Closing of Your New Home
You’ll have the guidance of a Realtor, Mortgage Loan Professionals and Title Professionals to your disposal, but it’s always wise to make yourself aware of the home buying process, to ensure it goes as smooth and trouble-free as possible. After all, for 95% of the population, buying a home is the biggest investment they will ever make. Take time prior to the closing to make certain that the important paperwork reflects your understanding of the transaction.
To help you get started, we’ve outlined eight important tips.
1. Ask to Review the Title Insurance Commitment 7+ Days Prior to Closing
The title insurance commitment is almost always prepared within a week or less of the time the order is placed with the title company by your realtor or mortgage company. The commitment shows the current property owner and lists the documents required in order to transfer ownership to you. Schedule B-Section II shows all of the recorded property rights the title company found that will take precedence over your ownership. These usually include utility easements, restrictions and other routine matters. Pay special attention to property rights, as they may affect your plans for the property. For example, there could be an easement area on the property right where you’re thinking you want to build a pool or outbuilding. Reviewing the title commitment will help you understand the legal nature of what you’re buying—do not hesitate to ask questions.
2. Talk to Your Realtor, Loan Officer and Title Company Contact About What to Expect
Several days before closing, talk to your realtor, loan officer and title company contact about what to expect. Ask questions, and be informed about the process. Your realtor is a free resource to you, so you may as well use it.
3. Be Present During the Closing
As mentioned, the home purchase may be the biggest financial transaction in which you ever participate. Everyone is busy, and no one wants to miss work, but it is very important to be present during the closing. Allow yourself the opportunity to clearly understand all of the details and financial commitments that take place. It is difficult to know what is going on, particularly last minute changes, when someone is trying to explain it to you over the phone, rather than in person. Bring any estimates that your lender provided you to the closing so that you can reference them. Consider making arrangements to arrive an hour before closing so that you can thoroughly review all the documents. While Powers of Attorney can be assigned for those who are unable to attend the closing, there is no substitute for a personal appearance.
4. Understand All Charges and Credits on the Closing Statement
Make sure you understand all of the charges and credits on the closing statement, especially the real estate taxes. The taxes will be handled in a variety of ways depending upon the time of year and the terms of your Purchase Agreement. The seller’s obligation for taxes usually ceases at closing, so ask the closing agent explain to you how payments and credits are being handled.
5. Confirm That the Interest Rate and Term in the Promissory Note to Lender Are What You Expected
You will be provided a payment letter which details not only the principal and interest owed each month but also any additional amounts the lender requires for tax and insurance escrows and your first payment date. Check the adjustment dates and index if your loan is adjustable.
6. Review the Seller’s Deed to You
Make sure your name(s) is spelled correctly and that the deed vests title in the manner you want – tenants by the entireties (husband and wife), tenants in common or joint tenancy with rights of survivorship. Ask for these terms to be explained if you do not know. Please be aware, the title company cannot practice law and give advice, but its representative can explain what each form of ownership means. Each has different legal significance.
7. Review and Understand the Survey to Understand the Location of Easements, Fences, Possible Encroachments, and More
Be aware of the location of any easements, fences, possible Encroachments, etc. These things can affect your plans for the property. Keep a copy of the survey in a safe place; having a copy may save you money if you decide to sell or refinance down the road.
8. Keep Record of the Owners Title Insurance Policy and Recorded Deed
A few weeks after closing you will receive your Owners Title Insurance Policy and recorded deed from Freedom Title. Keep these documents in a safe place. The title policy, in addition to providing you the insurance protection as stated therein, may provide you with a significant premium discount if you refinance or sell.
If you pay attention to the details about your purchase and take responsibility for understanding them, you’ll be much more likely to avoid unpleasant surprises after the closing – surprises that can be difficult or impossible to change. Once again, if you have questions, ask your realtor, mortgage loan contact or title agency contact. They are there for you.