Closing on a home, also known as “settlement,” refers to the process of completing the sale of a property and transferring ownership from the seller to the buyer. This process typically involves signing a number of documents and paying any remaining fees or costs associated with the sale.
The closing process typically begins after the buyer and seller have agreed on the terms of the sale and a contract has been signed. At this point, the buyer will typically apply for a mortgage or secure financing for the purchase of the home. The lender will then review the buyer’s financial information and, if approved, provide a mortgage commitment.
Once the mortgage commitment has been issued, the closing process can move forward. This may involve scheduling a closing date and time, ordering a title search to ensure that the property is free of any liens or encumbrances, and arranging for the transfer of funds.
On the day of closing, both the buyer and seller will typically be required to sign a number of documents, including the mortgage agreement, the deed transferring ownership of the property, and other documents related to the sale. The buyer will also be required to pay any remaining fees or costs associated with the sale, such as closing costs, property taxes, and insurance.
Once all of the necessary documents have been signed and the funds have been transferred, the closing process is complete and ownership of the property is transferred from the seller to the buyer. Overall, closing on a home is an important and often complex process that involves a number of steps and requires the coordination of multiple parties.
#1 – Security deposit
This is most commonly what is held by the title company and most commonly is an expected payment. What surprises most homeowners is “their check does get cashed right away,” Tyler Osby explains, a branch manager and certified mortgage planner at the Tyler Osby Team at Fairway Independent Mortgage in Urbandale, Iowa. And you also want to keep in mind that you will at times, not be able to recoup the money when you don’t purchase the home.
#2 – Hiring a certified home inspector
Before closing, it is important to hire a certified home inspector when you uncover any hidden damages. You can negotiate repair terms before finalizing the deal. And while it is not mandatory, it is a precautionary measure that can save you thousands in the long run.
“Home inspection will help you avoid costly surprises later” according to Osby, many people elect to skip this step entirely to save money, and ends up being a decision that turns out to be very expensive after purchasing.
#3 – Down payment
This amount is dependent on the size, the location, and the type of mortgage.
“The average of a 30-year fixed mortgage rate is 4.51%, up from 4.44% last week. A 15-year fixed mortgage rate has increased to 3.90% this week, from 3.87% last week” explains the Local Records Office.
#4 – Appraisal
A property appraisal report can also be a huge expense, whereas lenders will require you to have a professional appraiser to determine the loan and determine the property’s current market value, as well as mortgage program guidelines.
Your lender is looking out for your best interest to get the best offer, and an appraisal will be necessary before finalizing the agreement.
These range from government filing fees, to escrow fees, notary fees, and any other expenses associated with transferring the deed.
#6 – Escrow account
This is where the money goes into an account that is used to pay for expenses on the homeowner’s behalf, which includes, but is not limited to: homeowners’ insurance premiums, private mortgage insurance (PMI) premiums, and property taxes.
#7 – Closing Costs
As the appraised value of the property records is checked, the seller has the right to sell you the home. The real estate agent must be paid for their work.
The seller may or may not pick up these costs. Add an additional 2% to 5% of the home purchase price to anything from loan origination fees, and attorney fees, to prepaid homeowners association fees and taxes.
#8 – Home Warranty
Generally is to protect you from costs and protects you from older appliances that are warped and no longer covered by the manufacturer, the few hundred dollars a year could really be a good call.
#9 – HOA and condo fees
When you are a part of the homeowner’s association, you will have to account for a monthly fee that goes towards maintenance costs and shared community amenities.
Your HOA fees will also save you time and management of lawn care, and landscaping. And when considering a condo, be sure to ask for more information regarding the repairs to the building that are not part of the annual budget.
#10 – Maintenance, repair, renovation, and redecorating
When you start updating your home, these unexpected costs accumulate and do add up. Choosing a home in your budget range may be something to consider when you take these extra costs into account.
#11 – Utilities
Renters usually don’t usually pay separately for water, trash, and sewer. When your home is a lot larger, you will end up paying a considerable amount more for electricity and gas.
#12 – What to expect
When calculating your monthly mortgage payment and interest, be sure to add insurance and taxes too, because all of it adds up. Of course, taxes depend on where you live, Wallethub reports the average U.S. homeowner’s insurance is about 2,000 a year.
And it costs about $1,000 for homeowner’s insurance, but this also can vary quite a lot.