Buying a Home – The Closing Process

Buying a home is a very exciting occasion, but there is a little more to it than just signing on the bottom line. Closing the deal on your brand new home consists of the necessary steps below:

Submitting Your Offer

When submitting an offer there is no guarantee that it will be accepted by the seller, that’s why you should always bring your “best and highest” to the table. Especially if you REALLY want the house are going up against other offers. Once you find you’re “Dream Home,” it’s best to move quickly. Give yourself some negotiating room, where possible, but try not to go lower than 10% of the asking price. Keep an eye on the market trends in the area to help with your decision.

The Contract

After an offer is accepted by the seller, it is followed by the contract. The contract is legal and binding, on the buyer’s part, to purchase the home/property if any contingencies are met. All the details of the transaction are outlined in the contract; such as, the property description, selling price, the closing date, close of escrow and contingencies.

Deposit

Your deposit is also referred to as “earnest money.” The Earnest Money deposit shows your commitment to the buyer and that you are serious. Typically the deposit will be around 1% of the purchase price and is incorporated in your offer and will be applied to the down payment. The deposit check is then held by either the listing office or the seller’s lawyer, until the transaction is closed. Sometimes, if you change your mind and back out of the deal, it’s possible that you can lose your deposit. If your offer is not accepted by the seller, then your deposit will be returned to you.   

Contingencies

Contingencies are specific requirement in a contract that must ensue before the buyer is obligated to close. Usual Contingencies seen are a suitable home inspection and that the buyer’s financing has been secured. Typically, a home inspection contingency is allotted a 10-14 day window after the contract has been accepted. Financing contingencies can run around 30 days. On the other hand, in a seller’s market, the buyer may be asked satisfy the contingencies in a shorter time period.  

Home Inspection

A home inspection is where a licensed professional conducts a detailed inspection of a home. This measures its structural and mechanical condition. The home inspection is conducted because a qualified home inspector with a trained eye will be able to catch “would-be problems” that a buyer might not perceive on their own.

Closing Statement

The Closing Statement is also known as a "settlement statement." What this is is a document that the Department of Housing and Urban Development needs to account for all financial aspects concerning the sale and purchase. It illustrates an itemized list of the funds that were paid at closing. The list includes items such as, the real estate commissions and preliminary escrow totals. According to The Real Estate Settlement Procedures Act, a copy of closing statement must be distributed to both the buyer and the seller at least one day prior to closing.

Closing Documents

Paper work must be completed before you can close on a house. A title search must be conducted in order to see if the title is clear. Title insurance also protects the buyer and lender from any oversight that might have been made concerning a claim that might have been made against the property.    

The Closing Costs

Closing cost vary with every transaction but they include items such as, a loan origination fee, cost for credit report, lender’s inspection fee, title insurance, mortgage broker fee, taxes and document preparation fees. Your lender is obligated to give you preceding communication of any fees connected with your loan.

The Final Arrangements

Practical arrangements must be made, such as, utility service and your first mortgage payment must be made before the deal is finalized.

Settlement

The Settlement refers to the payment of the balance of the purchase price that the buyer owes on the property, and the cost of the transfer of the title on the home. This occurs on the possession date stated in the contract.