5 Things Home Buyers Should Know About Closing Day
You’ve almost crossed the finishing line of your real estate transaction—otherwise known as closing day. What could possibly go wrong? Here are 5 things home buyers should know about closing day.
1. Your mortgage interest rate could change
The interest rate your bank quoted won’t last forever. Instead, a bank will “lock-in” your interest rate for 45, 60 or another number of days. Once that lock expires, you may have to pay a higher rate, since rates can change almost daily.
As you approach closing day, all sorts of roadblocks can pop up, such as open permits and illegal renovations. These issues could halt the loan process until they’re resolved.
For example, at the last minute, a buyer in upstate New York discovered that a previous owner built an addition to the home in the 1970s but never properly documented it. Turns out, the work had been done so poorly, it wouldn’t pass today’s inspection requirements. The buyer had to hire an architect, re-draw plans, and document the issue before the bank approved the loan. Consequently, the buyer lost the mortgage rate he’d been quoted.
That’s just one example of why you shouldn’t assume the journey to closing will be glitch-free.
2. You may not be done with the mortgage process yet
It’s easy to assume that once you’ve completed the application and paperwork, your loan is approved and ready to go.
It doesn’t always work this way. Some lenders will verify income, assets or credit all the way up until to the last minute. So, don’t do anything that might affect your credit rating, like applying for a new credit card, financing a new car, or taking a new job, without first checking with your mortgage professional.
3. Don’t forget: the house isn’t yours yet
Most real estate contracts provide for a walk-through up to 24 hours before the closing. Be sure to take advantage of it. Here’s why: You don’t want to close on the home if systems aren’t working, the seller hasn’t made the promised repairs, or the seller hasn’t moved out. If things aren’t as they should be, postpone the closing until they are.
4. You may not be done with your homework
Once the home closes, it’s physically yours and completely your responsibility. In most states, the law is on the side of the buyer and requires the seller to disclose any issues and confirm those issues have been resolved.
In other states, it’s buyer beware. In this case, it’s up to the buyer to double- and triple-check that the seller closes all outstanding building permits, releases all liens from the title report, and resolves any issues with the local building department, assessor or health department.
5. The actual closing could be anti-climactic
Sometimes, the buyers and sellers, flanked by attorneys and title folks, sit around a conference-room table for hours, passing paperwork around and using calculators. This closing process is archaic and cumbersome. What’s worse: If the transaction wasn’t smooth, the atmosphere around the “closing table” can become tense.
But in most places these days, buyers sign loan documents in their home or office and the seller shows up at the title company to sign off on the deed. Buyers wire their down payment, and sellers receive their funds electronically. It’s all seamless and straightforward and happens in the background.