You're thrilled (and perhaps a little exhausted) that the home seller accepted your offer, but you're getting close to the finish line. All you want to do is move in, but there are many things you need to schedule and arrange first. You are also unsure of when your new home will close. You can simply decipher an 11-step timeline for house closing in this article, bringing you one step closer to buying your new home.
You'll be in regular contact with your lender over the coming weeks as you prepare for closing day, make sure you're getting a good deal on insurance, and complete final due diligence on the home. Here are the procedures that must be followed between the day your offer is accepted and the day you receive the keys to get you started.
1. The closing procedure is about to begin; consider the big picture
There are various stages that must be performed in order for a quick and seamless closing process, which normally takes 30 to 60 days. Make a plan for keeping track of your progress with each condition for closing since several of the steps will take place at the same time. By doing so, you'll be able to finish that step fast, mark it off your list, and get closer to the finish line!
Think about online sales
Also keep in mind that a rising number of title agencies and lenders that prioritize using technology may allow you to complete your full closing process remotely, frequently with shorter timescales than those listed below.
2. Submit documentation and respond to lender inquiries
Average time: Ongoing throughout the process
The paperwork will be created by your mortgage lender and will be particular to the residence and loan amount. Practically speaking, you are now committed to your lender because there won't be enough time to start the mortgage application process over with a different lender and still make it in time for the closing date specified in your purchase agreement
Ask the lender for a list of everything they will need from you prior to closing as soon as the seller accepts your offer. Even though they might still ask for more, at least you'll have a general idea. The month before closing shouldn't be spent traveling or doing anything out of the ordinary because you'll need to be available to act swiftly on any requests from your lender.
Within three business days of receiving your application or any significant alterations to the lending scenario, the lender is required by law to provide you with an estimate of your loan. This includes completing the sale of the property you are buying. The estimate will include both your closing expenses and the total cost of your loan.
Examine your estimate carefully once you receive it. Choosing your rate lock choices should be done at this time. Since closing times are tending to be on the longer side, lengthier rate locks are frequently subject to an additional price, but the peace of mind they provide may be worth it. Consult your lender or agent about the typical closing times in your area before deciding on the type of rate lock that will best suit your needs.
Changes to your credit
Maintain a steady income and credit status. A credit and income check may be done by your lender just before you close on a home. Even with a higher wage, changing jobs could cause the loan underwriting process to drag out and cause the closing to be delayed. The process of closing could also be delayed by making significant expenditures, creating or closing credit lines, running up credit card debt, or obtaining a personal or auto loan. You don't want to take any actions that could result in hard queries on your credit file until the closing papers are signed.
3. Obtain title insurance and other closing services by shopping around
An average of 7 to 14 days
Your lender is shielded against issues with the property's title by the lender's title insurance. You will normally be required to buy this as part of the closing procedure by your lender.
You can ask to utilize an escrow agent you've previously worked with, but typically your lender or real estate agent will recommend their favorites. The title insurance company will then be selected and bought for you by the escrow or closing agency.
Both escrow services and title insurance are subject to competitive bidding; however, the feasibility and expected benefit of doing so will depend on the amount of your loan and the availability of title insurers in your area.
Once you've decided on a title insurance provider, they will do a title search and send you a report of any encumbrances, or claims made against the property that was discovered. Utility company easements are a common occurrence in these records, but only a serious problem, such as an unpaid lien, is likely to cause a closing delay.
4. Plan a home inspection and bargain for repairs if necessary
An average of 7 to 14 days
Your purchase agreement should have specified an inspection contingency. Even if an inspection is in the buyer's best interests, in a seller's market, purchasers may waive this to increase their competitiveness. If your contract does contain this clause, you might ask your agent to suggest a reputable inspector.
It seems smart to schedule this early because the home inspection will almost surely reveal some flaws. Don't put this off until after the home evaluation; you want to allow yourself enough time to discuss any compromises and avert closing delays. If the inspection reveals problems with the property, you can ask the seller to lower the sales price or, if your lender permits it, to give you a credit at closing.
It may be simplest to have the builder agree in writing to handle the repairs themselves after closing if you're buying a new construction house in a planned community where the builder is still creating new homes. This should only be used when the repairs are mainly aesthetic and do not prohibit you from moving into the home. Prior to closing, make sure the builder gives you the Certificate of Occupancy or a local equivalent. This will probably be necessary before your lender funds the loan.
5. Obtain the evaluation report
Average: 14 to 30 days
As soon as they create the updated loan estimate for the exact property you're buying, your lender often orders an appraisal. The length of the appraisal process becomes the most important scheduling issue in achieving the desired closing date in extremely active real estate markets where appraisers frequently have a large backlog.
You'll need to speak with your real estate agent and the lender if the appraisal turns out to be less accurate than you anticipated. The usual options in that situation are to negotiate a lower price with the seller or to raise additional funds and make up the difference yourself. If your contract has an appraisal contingency, you are free to terminate it if the appraisal is undervalued.
Your lender should send you a mortgage commitment letter after the appraisal is finished, confirming that they will fund the loan for the home you're buying. Be sure to include these on your to-do list since the letter can have additional requirements that must be satisfied before closing.
6. Shop for homeowners insurance
Typically 3 to 14 days
One of the simplest tasks in the closing process may be obtaining homeowner's insurance, particularly if you already have a working relationship with an insurer that offers homeowner policy.
Most lenders demand that buyers maintain homeowner's insurance coverage up until the loan is fully repaid. Before closing, your lender will undoubtedly demand that you present proof of insurance. Find out what levels of insurance your lender requires, then shop around for bids or work with your current insurance agent to customize a policy to fit your needs.
7. Be alert for updated loan estimates
Before closing, anticipate receiving many revised loan estimates since lenders frequently create fresh copies as soon as new details about the final loan—like the anticipated title insurance and homeowner's insurance premiums—come to light.
Before closing on a house, the lender will frequently run another credit check. Things can take longer if your credit has changed in any way. There can also be delays caused by the lender that are out of your control, like if the bank's chosen appraiser failed to submit the appraisal report by the deadline. In that case, the lender needs to have the option of a free extension of the rate lock. You might have to pay a charge to extend it in other circumstances.
8. Take the final walkthrough
An average of three days
There may be unforeseen problems that cause the closure procedure to be delayed. An excellent time to review the items you bargained for after the inspection is now as you stroll through the house. For instance, did the seller fix the noisy air conditioner that was noted in the inspection report if they had agreed to do so? If not, or if a new issue arises, the seller can give you money to cover your closing fees rather than attempting to fix the issue before closing.
Did the seller damage anything on the way out if they left after the inspection but before your final walkthrough? Is the appliance or piece of furniture that the seller promised to leave there still there?
Ask your agent to talk to the seller's agent about any significant issues found during the final walkthrough. Instead of postponing closing, it would be ideal if you could get a concession.
More often than not, you'll see small issues like nail holes where artwork was supposed to be, dirty bathrooms or kitchens, etc. Asking your agent for recommendations to a few reputable contractors at this time can help you arrange for someone to handle these issues as soon as the deal closes and before you move in.
9. Examine the paperwork before closing
An average of three days
A final loan disclosure must be sent to you by the closing agent at least three working days before you are expected to sign your documents. To be sure they're on track to provide you with every document you'll need to sign, check in with your escrow agent.
Some of the most significant paperwork you'll encounter during closing includes:
Closing Disclosure: A typical five-page document outlining all of the final conditions and fees associated with the mortgage loan you are about to close on.
Promissory Note: The document known as a promissory note comprises the promise to return the loan amount borrowed as well as the conditions for repayment
Mortgage or Deed of Trust: There are various variations of the mortgage or deed of trust, depending on the state and lender.
Before the closure, you should query the escrow business about
What paperwork, such as a photo ID provided by the government, will I need to bring?
How much and in what form will I be required to make a payment at closing?
How will my rebate be paid if I receive one at closing?
10. Seal the deal and receive the keys to your new residence
Average time: under a day
Even though you carefully examined the documentation beforehand, there are a few important items to check when you sit down to sign all closing paperwork:
Are the loan's kind, interest rate, payment schedule, and other important terms what I anticipated? Are they all the same?
Are all of the documents' entries for my personal information accurate?
Are there any fees that I'm unclear about or that have considerably changed?
What happens if I don't pay my mortgage on time?
Hold and wait on signing anything until you completely comprehend any substantial variations between the paperwork you studied before the closing day and the documents they offer you on the closing day. Do not feel compelled to move more quickly than you are comfortable with or to skip steps.
Advice on completing a home sale quickly
Think about the digital closing procedure: It might be quicker and more convenient for you than an in-person closure.
Prepare documentation in advance to speed up the process: Have your documents ready for your lender when they need them. Make sure you have copies of the last two years W-2 statements and tax returns. Your two most recent pay stubs and bank statements are also required. The procedure of gathering your paperwork could take the longest, but they are necessary verification documents that you must present to your lender.
Be honest with your Lender: Tell your lender the truth if you're concerned that it would affect your ability to get a loan; otherwise, they won't approve you. Any information you omit from your loan application may be considered loan fraud. Whatever information you want to conceal, your lender will find it. The mortgage approval procedure includes the necessary credit checks, home inspections, and employment verifications.
Utilize pre-approvals: cut down on time by one week by having one ready when you make your offer. Your lender will swiftly transition you from "creating the contract" to "underwriting the loan" if your loan has been pre-approved.
11. Documents should be saved and filed.
Since you might need to present your original paperwork when you later sell the house, need to file an insurance claim, or are in another scenario where you need to demonstrate ownership, you should preserve them in a secure location. The purchase agreement, deed, promissory note, and deed of trust or mortgage are the primary original documents that should be kept in a secure location.