Things to Consider Before Closing on Your Next House
We recently closed on our new home purchase. Hooray! I’m the newest home-owner you know.
I thought it might be helpful to share some lessons learned from my experience.
You Can Still Cancel the Deal
Even though you have a signed sales contract and signed lender application, you can still technically cancel the deal. Don’t feel like you’re completely trapped into this deal. If you find a reason not to close (lost your job, got sick, etc.) then don’t take on a mortgage that you won’t be able to handle.
Keep in mind though that you’ve paid ernest money and that might be forfeited. Also, the seller could potentially sue you for breaking the sales contract. Still, neither is worse than taking on a loan that you cannot pay back. This is serious debt and would ruin your credit for a long time if you couldn’t handle it.
Avoid Committing Too Much to Closing Day
You don’t own this home until you close the loan and transfer the deed with the title company. A lot could go wrong which could delay your closing date. Therefore, avoid placing too much pressure on the actual closing date.
If possible, avoid scheduling movers or home improvement contractors, transferring mail and utilities, and other date sensitive things prior to officially closing on the house. This doesn’t mean you can’t get quotes for movers and contractors and have them on the ready.
We actually met with potential contractors when we were having the house inspected. Once we closed we gave the contractors the green light and scheduled the work.
Over-Communicate with All Parties
This is huge. When you are a week away from your scheduled close date, start communicating with all parties involved in the close process. This includes:
- the lender,
- the title company,
- your realtor/agent,
- your bank where closing funds are coming from,
- and any parties signing on the loan with you (your spouse, parents, etc.).
I would recommend checking with them every other day for status updates and to see if they need anything from you. This sounds like overkill, but it could potentially save you if you absolutely need to close on time.
There are a lot of moving parts to the closing process, and most of it requires a human to move things along. Humans make mistakes. So if you’re there bugging them and checking with them every other day or so then you’ll be more likely to catch mistakes and help them clear things up timely. They won’t mind. You are making them all a lot of money.
This is actually not my strong suit. I tend to have too much faith in people and processes, and communicate very little. This is one time when I could have used to communicate a little more forcefully because an issue arose at the last minute that delayed our closing.
Know the Rules About Closing Funds
Speaking of communication, it’s very important to understand what the lender, title company, and bank expect when it comes to the funds you are using to close (i.e. your down payment money).
Your lender may be held to federal or state government regulations when it comes to your closing funds. Ironically, the more you put down, the more they expect from you. They may need to “source” the account that the funds will be paid from.
This will involve looking at the history of the account to see how long the funds have been there. If they haven’t been their long (i.e. more than 60 days) they will trace the funds to another account (i.e. savings account, IRA, business account) to ensure it’s your money and not a gift or from doing something shady, like selling drugs.
When showing the lender your account statements and transaction history, only give them the information they need and nothing more. Too much information could actually cause the lender to dig deeper than they need to.
The title company, who you will pay the closing funds to, will likely require a cashiers check or wire transfer for payment. If the amount is over a certain threshold, like $1000, they will not take cash or a personal check.
Lastly, check with your bank to see how they handle wires and cashier’s checks so that you are not caught off guard at the last minute. Capital One 360 does not do wire transfers or cashier’s checks. Do not keep your closing funds there.
I actually used Capital One’s 360 Savings Account to save up our down payment and was going to pay from my 360 Checking Account. But because of this limitation I had to transfer the closing funds to my Chase Personal Checking Account a week before closing.
This issue created an extra step for the lender in verifying closing funds and ended up delaying our closing by a day. I talked with Capital One 360 and they have no plans to start doing wires or cashier’s checks any time soon.
Don’t Forget the Baby Sitter
If you and your spouse are attending the closing together, you may need to find someone to watch your kids. We left this step to the last minute and had trouble finding someone to help. The closing process takes a minimum of 15 minutes, and can take as long as an hour.
I’m certainly no expert on the closing process. Be sure to talk with your real estate agent, lender, and title company about any other issues that may be relevant to your particular situation. If you have a tip for a smooth closing I’d love to hear it. Leave it in the comments below.
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Congrats on the new place!
You’re absolutely right about communication. You think all of these professionals will all be on point and get things done and then you find that one form hasn’t been turned in and no one bothered to ask about it. You really do have to get a heads up from everybody and keep asking what the next step is and if anything needs to be done.
“[Communication] is actually not my strong suit. I tend to have too much faith in people and processes, and communicate very little.” I am the same way and appreciate that this was mentioned.
I’ve noticed that this is crucial in any big purchasing decision. When signing contracts for cars or houses, the most important financial decisions you can make, it is always ok to test all the parties involved to hold to “the customer is always right.” The mistake can easily be made to think it’s too late to cancel the closing when you see red flags near sealing the deal. I have learned to assume my rights as the purchaser and not be afraid to use them.
Do you have peace of mind since closing?
“[Communication] is actually not my strong suit. I tend to have too much faith in people and processes, and communicate very little.” I am the same way and appreciate that this was mentioned.
I’ve noticed that this is crucial in any big purchasing decision. When signing contracts for cars or houses, the most important financial decisions you can make, it is always ok to test all the parties involved to hold to “the customer is always right.” The mistake can easily be made to think it’s too late to cancel the closing when you see red flags near sealing the deal. I have learned to assume my rights as the purchaser and not be afraid to use them.
Do you have peace of mind since closing?
Congratulations, PT!
After several home closings and many refinancings, our most important lesson has been to ask for the documents a day or two in advance so that we can read through them all. Today a title company may even be willing to e-mail the file the evening before, especially if the mortgage means that the package is a 100-page PDF.
Most title companies are too overworked/shorthanded to volunteer this service, and they frequently don’t get all the documents until the afternoon before the closing. But you can assure them that you’re going to read every page, even if it takes hours in their conference room while they sit there fidgeting with their pens and tapping their feet. Once they appreciate that you’re going to take less time if you can see the documents a day or two early, they’ll make the extra effort.
Over 80% of our closings had typos or errors. A couple of them were serious (wrong numbers), and most were significant (spelling errors in our names or our Hawaii addresses). All of them were fixed the morning before closing. If we had not seen the documents a day or two before, the errors would have delayed the closing by at least a day.
Stick up for yourself. Don’t get cajoled or intimidated. Nobody else cares as much about the closing as you do, and you may have to live with their mistakes for decades.
So, PT, have you changed the locks yet?
Congratulations, PT!
After several home closings and many refinancings, our most important lesson has been to ask for the documents a day or two in advance so that we can read through them all. Today a title company may even be willing to e-mail the file the evening before, especially if the mortgage means that the package is a 100-page PDF.
Most title companies are too overworked/shorthanded to volunteer this service, and they frequently don’t get all the documents until the afternoon before the closing. But you can assure them that you’re going to read every page, even if it takes hours in their conference room while they sit there fidgeting with their pens and tapping their feet. Once they appreciate that you’re going to take less time if you can see the documents a day or two early, they’ll make the extra effort.
Over 80% of our closings had typos or errors. A couple of them were serious (wrong numbers), and most were significant (spelling errors in our names or our Hawaii addresses). All of them were fixed the morning before closing. If we had not seen the documents a day or two before, the errors would have delayed the closing by at least a day.
Stick up for yourself. Don’t get cajoled or intimidated. Nobody else cares as much about the closing as you do, and you may have to live with their mistakes for decades.
So, PT, have you changed the locks yet?
@Nords This is great advice, Nords. We will change the locks tomorrow. We had a lease-back to the old owners for a few days.
@Nords This is great advice, Nords. We will change the locks tomorrow. We had a lease-back to the old owners for a few days.