After all the preliminaries, which may have taken a couple of months to transpire, you probably feel as though the actual day of the closing is so welcome it ought to be marked by colorful balloons and a big brass band.
By all means, be ready to celebrate, but keep in mind that this last rite of passage to mark your transition into actual ownership can be filled with financial land mines. In fact, very few closings occur without some unexpected glitches. It’s during this final transitional meeting of the buyer, the seller, the agents, attorneys, and lenders that Murphy’s Law (“Whatever can go wrong will go wrong”) kicks into high gear. You have to do your best to make certain in advance that every possible requirement has been met.
An Attorney, Title Company, or agent of the Title Insurance Company – an impartial and objective company that holds the down payment, oversees all the paperwork and then distributes the money when the terms of the sale have been met – will conduct the closing and make sure all the preliminary detail work has been completed in time.
Title insurance is an aspect of home buying that many people have found confusing. There are actually two types – lender’s and owner’s. What title insurance will do is insure you, the buyer, from any claims that may arise against the property you’re buying. When you have title insurance, you have an insurance policy that once you’ve bought it, you own it, or the title company is obligated to compensate you for damages.
Most lenders routinely insist on a title search and require buyers to purchase lenders title insurance to protect their investment.
Title insurance isn’t all that expensive and you should never agree to buy real estate without making it a condition of the sale, even if you’re paying cash for the property or the owner is going to hold the mortgage. If you go into a sale without it, truly horrible things can happen.
You’ll know in advance what fees you’re going to be expected to pay, above and beyond the down payment. Your lender, lawyer, the escrow firm, or your agent will send you a list no less than three business days before the scheduled closing date. You should expect to pay from two to six percent of the cost of the property in closing costs. Depending on local laws, they may include mortgage recording fees, legal fees, title fees, pre-payment of property taxes and homeowners insurance, and transfer taxes just to mention a few.
You should check every fee in advance, and if there’s something you don’t understand or don’t think you should have to pay, the time to question it is before the closing.
You may see a fee for mortgage insurance on the list. That doesn’t mean that if you lose your job and are unable to make your payments, the insurance company’s going to send in those monthly checks for you. Mortgage insurance covers the lender if the buyer goes into default and the lender does not sell the property for the amount owed.
When you know everything’s been completed and the closing is going to take place as scheduled, you should make an appointment with the agent for a last-minute inspection of the property. Known as the final walk-through, it takes place the day of, or just before, the closing.
If something you thought you were buying along with the house seems to have disappeared, you can discuss it on the spot without throwing the closing into an uproar. Jot down any details of your last-minute agreements in a notebook and have him or her sign it.
You should expect during this inspection that the seller has vacated the premises or will move out before the closing.
On closing day, you’ll sign a number of papers and checks. Take your time reading everything and don’t sign anything unless you understand exactly what it says.
That’s why it’s useful to have the title company present at the closing to quickly explain anything you don’t understand.
Closings have rarely been known to take up an entire day, and most home sale closings shouldn’t last more than an hour or two. Generally any snags are ironed out on the spot.
After all the papers have been signed, the seller will hand over the keys and you’re finally going to be able to walk into the house and close the door behind you, knowing that at last it’s your own home. That’s the time to break out the champagne.