Navigating Your Real Estate Fence – Forbes Advisor
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The closing day is the culmination of a multi-week process that could include financial drama, tense negotiations, and lots of discussions with real estate professionals, lawyers and mortgage lenders.
Here’s a guide to finding out what happens after you sign the purchase agreement until the day you get the keys to your new home or complete your mortgage refinance.
What is a real estate fence?
A real estate closing is when you finalize the paperwork to buy your new home or complete your refinance deal. Once the paperwork is complete, you are the owner and responsible for what is contained in each document you signed, including a commitment to pay mortgage payments for the life of the loan.
Although federal law allows a right of cancellation for people who refinance – giving them until midnight on the third business day after the transaction to cancel the mortgage – there is no such provision for home purchases. new. Once you have signed the documents to buy a new home, they are official.
At the close, the buyers will sign various documents formalizing their commitment and setting out their rights and responsibilities. In addition to discussing the paperwork with your real estate professional, lender, and / or attorney, you can view templates for some of the key documents through the Consumer Financial Protection Bureau’s website, including the promissory note, mortgage deed and initial escrow disclosure. The documents cover the arrangements between buyers and sellers, and buyers and their lender.
How to prepare your fence
There are several steps in the closing process, which can take several weeks. In fact, the typical time to close after mortgage application was 44 days in July 2020 for everyone. types of mortgages, according to Ellie Mae’s original analysis report. This period of several weeks allows buyers to finalize the financing, examine the property with professionals and possibly negotiate new conditions. The closing process is much faster for those paying in cash, perhaps as little as a week if all purchase contingencies are lifted.
Here is an overview of the steps in the closing process leading to real estate closing.
1. Signature of the purchase contract
The closing process begins when you reach an agreement on a sale price with the seller and sign a purchase contract. The purchase contract becomes the most important document in the closing process, as it sets out the terms of the sale, including:
- The timing of the closing process, including the deadlines for the various stages
- How the purchase will be financed
- What contingencies, if any, does the contract have such as allowing the sale only if buyers can sell their current home or letting buyers opt out if issues are discovered during the home inspection?
If you have already received a prior approval letter from your lender of choice Within the last 90 days, you can work with the lender to finalize the loan details and incorporate them into the document.
2. Finalize the financing
Once you have provided the lender with details of the home you wish to purchase, the next step is to obtain a mortgage commitment letter from the lender, who may need more financial details to be provided to the loan underwriter. the company.
If you receive a letter of commitment, review the terms, which will include the amount of the monthly mortgage payment and the escrow account, if you have one. It’s probably when you lock in your interest rate or get a deadline to do so.
Be aware, however, that the engagement is likely conditional and has a designated time frame within which the final close must take place. For example, the buyer may need:
- Get a home inspection
- Maintain the same or similar income or credit score; if a buyer loses their job or makes a major purchase, such as a car or other home, demand could be compromised
- Provide assurance that the deposit will be fulfilled
The final letter of commitment will be issued shortly before closing and will confirm that the loan offer is final, without conditions.
3. Complete review of ownership and title
During the closing process, the property will be thoroughly examined, both physically and legally, and the results could easily confirm, complicate or terminate the purchase contract:
- Evaluation. One of the first steps the lender will take after you sign the purchase agreement is to schedule an appraisal. A professional appraiser, who is an impartial third party, will provide an estimate of the property’s value. If the value matches or is very close to the agreed selling price (which is usually the case), the loan can probably be granted.
- Home inspection. The buyer will pay a home inspector to examine the property and identify problems, major and minor, that may require repair. Usually the buyer and seller will come to an agreement on what the seller will fix before the buyer moves in, but if they cannot, most purchase agreements include an eventuality of inspection. the house that allows the buyer to move away. You can also ask the seller to arrange a pest inspection to make sure there are no major issues, such as a termite infestation.
- Title search. Since the sale of a home is the transfer of a title from one person / entity to another, the securities companies will conduct a research prior to the closing date to ensure that any issues with the title, such as that a privilege, is resolved.
Your Real Estate Fence Checklist
As your closing date approaches, here are some things to put in place for the big day:
- Hire a lawyer. If you don’t hire a lawyer for the first part of the process, like when negotiating and reviewing the purchase contract, you’ll want one for closing to make sure your interests are represented. Quickly consult your real estate professional and / or your lender to find out when and why you might need them and if they have any recommendations.
- Review your loan. Three days before closing or earlier, you will receive a closing disclosure from your lender. This is your chance to review the loan amount, the rate, the amount needed for the advance payment and other important information before the closing date. Contact the lender as soon as possible if you have any concerns or questions. Take a look at the interactive Closing Disclosure Tool of the Consumer Financial Protection Bureau for more information.
- Determine how you are going to pay the closing costs. You will need a cashier’s check that will cover closing costs, or records that show you sent the money by wire transfer. Buyers will pay 2% to 5% of the purchase price in closing costs, which could include sales charges, including valuation; title fees; starting points for loans; mortgage insurance premium (if you need it); attorney fees and Home Insurance premium
- Gather the remaining documents. You will want to show that you have purchased home insurance for the property, in case you are requested to do so, but you will also want to have on hand: a government-issued photo ID; a copy of the purchase contract; key loan documents, such as the closing disclosure, in case you need to review them when signing the closing documents and any pre-signed documents
Be sure to make a final visit to the property within 24 hours of closing. You’ll want to make sure that any issues you found during the home inspection are resolved, as per the agreement with the seller, and that everything else is in order.
Who needs to attend the closing of your property?
Advances in technology and the coronavirus have changed the way closures are conducted, some of them occurring from a distance or with just a few people. If you have more time, the closure can be done by mail.
Your real estate agent as well as a representative of the property company, who will check your ID to make sure it matches the information on the contract, will likely be present, along with your lawyer. The sellers can also be present or a lawyer to represent them.
Why your real estate closing could be delayed
Closures can be delayed for a variety of reasons, some of which are in the buyer’s control and some are caused by the seller, lender, or others.
Buyers can control the lending process to some extent as long as they provide the documents the lender needs as soon as possible, such as tax returns and tax records. They can also make sure to arrange for an inspector’s visit as soon as possible so that they have enough time to negotiate potential repairs with the seller.
However, if the lender has a backlog of applications and is unable to schedule closings quickly enough, there could be a delay. It is important for buyers to know that they can try to renegotiate a free or discounted extension of their interest rate freeze with the lender if it expires before closing.
Buyers can also cause problems if they change jobs during the closing process and / or if their income level is negatively affected. It may take longer for the lender to follow up with the new employer to ensure that they are earning as much income.
Throughout the closing process, buyers should be in constant communication with their real estate professional, their lender and, if necessary, their lawyer to ensure that the requirements set out in the purchase contract are met.
The best way to avoid drama in the closing process is to deal with the things that you can control properly and quickly, and to be as prepared as possible for any unexpected situations that might arise.