- You found the house
- You negotiated the best price
- You passed all inspection and appraisals
- You have entered escrow … The Real Estate Closing process
You have managed to move past all the hurdles to your dream house which may have proven to be quite a challenge, especially if you are not the kind of person that understands how the financial transactions go and how the real estate market works.
Here is a short, user-friendly guide to help you find your way through the amount of paperwork required by the insurance, warranty, appraisal, and mortgage statement on the property.
In this section, we also present some of the best tips to follow in order to avoid letting things get out of hand.
Homeowner’s Insurance, consider it as a priority
Most people don’t give too much thought to the homeowner’s insurance when buying a house. It should be the first step to homeownership to secure the biggest purchase you may make in your lifetime.
Homeowner’s insurance makes a huge difference in case something hazardous happens to your property. Make sure you find the best one for your needs, typically your mortgage broker can help you with find one for your house. Get price quotes from multiple insurance companies. It is recommended that you contact at least three companies, in order to better compare coverage, price and customer reviews. In some cases, an additional insurance is needed.
It’s important to choose the company that earns your trust, and not necessarily the one that offered the lowest price. A very good thing to remember is that you should not pay for more coverage than you really need.
Double check that the level of coverage is adequate to your true needs. Another thing to consider is that most lenders prefer you to escrow your insurance payments with your mortgage payments, so they can be sure their investment is protected.
Also, before you sign the papers, make sure you understood all the details of your insurance. In case you still have doubts, don’t hesitate to ask for further clarification.
Here are some tips to help you reduce your homeowner insurance costs:
- Raise your deductibles.
- Careful, if you live in a disaster-prone area, certain kinds of damage might be considered separate deductibles.
- Do not be afraid to negotiate a discount.
Home Warranty, Sleep well at night
Home Warranty helps you sleep well at night. It is a way of protecting yourself from expensive, unexpected repair bills. Depending on the local market as well as on the deal, the home warranty can be paid either by the seller or by the buyer. It is not as expensive as significant repairs and it is a good thing to have when you are buying a home.
In some cases, the seller can pay for the home warranty to protect the buyer from having to do any additional, expensive repairs to the house after the deal is closed. The cost of a home warranty usually is not high, as it fluctuates between $250 and $400, depending on the coverage. The payment must be made one year in advance.
In case you need to use such a warranty, the procedure is quite simple. When there is a problem, the owner calls the warranty company, which then announces the service provider that will be fixing it. The provider will always call the owner to schedule an appointment and fix the problem. The insurance company will pay the service bill.
The only thing that the owner might have to pay is a small trade service fee. In case the warranty company initially refuses a claim, do not accept no for an answer. Be careful when choosing a plan, because there are many existing coverage differences.
Pay attention when reading the fine print relating to the conditions for coverage and the reasons that can make them be denied. Remember, the secret to getting a good insurance plan rests in knowing all the details.
Getting an Appraisal
A real estate appraiser can be defined as a state-licensed expert who determines the value of a particular property. When it comes to closing a financial transaction, implying a property, both the seller and the buyer depend on his or her evaluation.
This procedure is meant to protect the buyer, as well as the bank that offers the mortgage loan, from purchasing an overestimated and overpriced piece of real estate. The property appraisers are not the same as property inspectors.
The difference between an appraiser and a home inspector is that the former will only look for obvious issues while the latter only checks, in a more detailed manner, things like the plumbing, or the air conditioning system. The appraisal report is required by the bank, and the cost is included in the mortgage cost.
The expert evaluates the property using one of these two methods: sale comparison approach, by comparing your home with other similar ones that were sold in the area, or the cost approach, used mainly for new buildings, a method that evaluates the cost of replacing the structure of the home.
If the reports show that the property in over-priced, you don’t have to panic. Some maintenance work might convince the appraiser to take a second look.
Otherwise, you can just ask for a second opinion from a different expert. Although the evaluation only lasts a few minutes, the final report may be ready within a week or more.
So, don’t expect to get it that same day.
When is the sale final? According to the law, a real estate transaction is considered closed when a closing statement or settle statement in signed. At this point, the buyer becomes the new owner of the property. This document must include details about all fees incurred by all the parties involved. The paperwork is completed with your attorney at the title company, “Closing day.”
Settlement regulations differ from one state to another. However, two aspects are the same all over the US.
- One of them is that the buyer has the right to visit the property 24 hours before closing the deal, to make sure that everything is according to the settlement and any damage noticed beforehand had been fixed by the seller accordingly. This is also called the “final walk-through” that you do with your Realtor.
- The second thing is that the buyer should receive the settlement statement 24 hours before signing, to have adequate time to review and compare it with the Good Faith Estimated for discrepancies.
Closing day differs in many states, but it is mostly a custom in most parts of the US that only the buyer is the one who is accompanied by his/her attorney. The presence of an attorney is necessary. There is literally a mountain of paperwork to be drafted and signed.
Two examples of such documents are the loan estimate and the closing disclosure. When the deal is sealed, you should always receive the front door keys, all the copies that were made, as well as any other keys relating to the property (if that’s the case).
Also, you should know that you will need an entire stack of documents for tax returns, in case you ever choose or need to sell the property.
Things that can Mess Up Your Deal
Until the closing day, and all paperwork is signed by both seller and you, nothing is certain.
Many things can happen that the deal may literally fall apart from one day to another. Here is a list of the most common mistakes that may seem insignificant for a homebuyer at the first glance, but which, for the lender may mean the difference of approving the loan or not.
- Do not make big purchases or co-sign for any family members on any credit cards.
- Do not charge your credit cards for anything, until after you have closed. While you may be excited and start buying furniture, buying expensive furniture or opening a new line of credit may threaten the deal as the lender may suspect that you are cutting funds reserved for the real estate payment.
- It is highly important to act responsibly and turn in all the required paperwork on time.
Make sure you have enough time to review the closing statement and try your best not to be the reason that will delay the signing. It is also important that any problem mentioned during the inspection or appraisal is fixed on time work with your realtor.
You signed the paperwork, you have the keys, you are done. Congratulations! Home Sweet Home!