Most people think that either finding the right home to buy or finding a buyer for their home is the hardest part of the home-buying process. However, the closing process can often be just as stressful and confusing. In order to simplify the process, we’ve gone through everything you need to know about the closing process step-by-step.
1. Make Sure that the Home Meets Your Needs
Buyers should make sure that their home meets their needs before starting the closing process. The home should be in their chosen neighborhood, be large enough for their family, have as many desired design features as possible, and be within the buyer’s price range, even after all of the additional costs.
2. Home Inspector
Buyers should have a home inspector inspect the home for any problems before going through with the closing process. Home inspectors can detect any structural problems, damage caused by termites or other pests, or other problems that may affect the safety and integrity of the home. Buyers should attend the home inspection and read the report created by the inspector, to make sure that they are fully informed of any potential problems of their future home. This is a step that is often skipped, especially if there are lots of people looking at a particular home, but this is an essential step. Skipping a home inspection can put the buyer on the line for extensive and expensive repairs.
3. Ensure that All Negotiations are Finished
Before beginning the closing process, make sure all negotiations are finished. This means that the buyer and the seller should have already agreed on the final price of the home, who pays for what fees, and any deductions the buyer believes should be added due to damage to the property. Make sure that the final dollar amount agreed upon is firm so that there are no surprises for either party on closing day. Nothing shuts down a closing process faster than a surprise change of offer from either party. Buyers should make sure that their offer is competitive, so that they don’t run into losing their bid for a home at the last minute.
4. What to Bring on Closing Day
Buyers and sellers should be sure to bring any and all important documents with them on the day of closing.
Buyers should bring:
- Valid I.D.
- Check for the closing costs
- Check for the down payment on the home
- Any documentation related to loan
- Copy of the contract between the seller and buyer
- Copy of the home inspection reports
- Proof of homeowner’s insurance
- Other documents that you haven’t provided to the mortgage loan officer or any other documents that are otherwise requested.
Sellers should bring:
- Valid I.D.
- Keys to the house or any other means of entering the house, such as garage door openers
- Check to pay for any closing costs
- Deed to the home
- HUD-1 settlement statement, which is an accounting of all of the money involved in the home-buying process
- Certificate of title, which is proof that the seller has the right to sell the home
- Other documentation that is otherwise requested
Other documentation will be prepared and signed at the lawyer or real estate agent’s office.
5. Have Necessary Personnel Present
Buyers and sellers should make sure that any lawyers, agents, witnesses, or other necessary people are present at the signing. It’s important that both the buyer and the seller have sufficient representation to make sure that the details of the contract are clear and honored by both parties.
6. Prepare for Potential Bumps in the Road
Buyers and sellers should be prepared to run into some obstacles while they are going through the closing process. People may not be able to arrive to the meeting on time, they may suddenly cancel the meeting, or there may be snags in the process of financing the home. All buyers and sellers should plan sufficient time to make sure that they are able to go through the process without rushing and take time to carefully read all contracts and documentation.
7. Escrow
Escrow is when a neutral, third party holds onto something valuable until the transaction is finished. When a buyer and a seller go through the closing process, the check that will be used to pay for the home will be held in escrow. This protects both the buyer and the seller while they are in the closing process. The seller cannot leave with the money without handing off the deed, and the buyer cannot leave with the deed without paying. While the details of the contract are being worked out, all buyers and sellers will have to go through the process of escrow.
8. Pay Closing Costs
Closing costs typically make up 3 to 6 percent of the total cost of buying a home. Most of the closing costs are because of taxes related to the sale of the home. Who pays the closing costs associated with the sale should be negotiated as part of the negotiation process of the home. Sometimes, a buyer or seller will offer to pay the other’s closing costs in order to make their offer more competitive or appealing. Buyers should make sure that they include these costs in the sale of the home.
9. Receive All Important Documentation
After closing on the home, buyers should make sure that they receive the following documents:
- Closing disclosure, which is a five-page document that explains the terms of the loan
- Mortgage note, which is a document that states your promise to pay back the loan and any consequences of not paying back the mortgage
- Mortgage or deed of trust, which secures the note and allows your lender to make a claim against the home if the buyer doesn’t pay back the loan
- Certificate of occupancy, which allows buyers to move into a newly-constructed home.
Sellers should receive documentation that documents the sale of their home and financial transactions that were associated with the sale.
Even though the home-buying process can be complicated, the process can be simplified with proper preparation and going through the closing process step-by-step.
For more information about buying homes or to find your dream home, visit McArthur Homes.
