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.
Image by Victor1558