Finding the home of your dreams can be a long process, but in the end, one well worth the wait. Now that you’ve had your offer accepted, that home is almost yours. It’s time to prepare for closing. There are several items you’ll need to take care of before you officially sign on the dotted line, and the house officially becomes yours.
Step 1: Set Up an Escrow Account
An escrow account is held by a neutral third party to ensure the financial security of both the buyer and seller of the home. Money to complete the sale of the house is placed in this account as a holding place while the closing process takes place. If something goes wrong in closing, no money has changed hands between the buyer and seller because it’s being held in the escrow account.
Step 2: Home & Pest Inspections
For this step, you’ll need a home inspector to complete a walk-through of the home to ensure that everything is working correctly and that there aren’t any unseen damages that will need to be addressed. To do this, you’ll need to hire a qualified third-party inspector, and most mortgage lenders will also require a pest inspection to be completed and any problems addressed as well before they will allow the closing to proceed.
Step 3: Negotiate Changes (if necessary)
Once the home inspection has been completed, you may be made aware of any outstanding issues with the home you’re looking to purchase. There may be repairs that will need to be made. As a result, you may need or want to renegotiate the sale price of the home and determine who will be responsible for paying for those repairs. Depending on how expensive the repairs will be and whether the seller is willing to lower the price of the home, you may choose to back out at this point if you feel the deal is not in your best interest.
Step 4: Mortgage Application Process
This step involves filling out forms to officially apply for a mortgage. There are numerous forms to fill out and sign and financial records that must be submitted. Your lender will let you know what documents you’ll need. Having a preapproval from your lender can save you time and headaches on this step. Once you’ve submitted everything, the lender will be able to provide you with estimates of your monthly payments on the loan, closing costs, a closing date, and the terms of the loan.
Step 5: Appraisal
Many times a lender will request an appraisal of the property to estimate its value. The appraisal must come in at or above the agreed-upon purchase price, or you will need to renegotiate the price with the buyer. Lenders will only approve loans up to the appraised value of the property.
Step 6: Title & Insurance
You’ll need to find a title agent to research the public records for the property to ensure that there are no outstanding liens on the property and that no one else can make a legal claim on the property. You’ll likely need to purchase title insurance as well (some states require it, and others do not). This protects the lender’s investment in your home.
Step 7: A Closing Date
Once everything is set, the escrow or title agent will notify you of a specific date and time for the closing. They’ll let you know what paperwork you’ll need to have with you. They will also provide you with a disclosure outlining your mortgage obligations and closing costs, etc.
Step 8: Final Walk-Through
You have the option to do a final walk-through within 24 hours of your scheduled closing. This ensures that the seller hasn’t removed anything included in the purchase contract and that they haven’t left anything behind for you to clean up.
Once you’ve completed your walk-through, the money in your escrow account can be applied to your down payment on the house. After that, all that is left is to sign on the dotted line. The process may seem overwhelming at first, but having an experienced real estate agent on your side can be immensely helpful.