|After looking at properties for days, weeks or months and finally choosing (or winning) the right one, you want to move in as soon as possible. Closing typically occurs thirty to forty five days after contract ratification.
You may wonder what happens between contract ratification and closing. Here is a short summary of those important things that will keep you, your lender and your realtor busy during that time frame.
You will need to secure a mortgage. Even if you were pre-approved, you’ll need to obtain a loan for a specific amount of money for the specific house you want. The lender will take another look at your income, assets, debts and credit score to see if any significant changes have occurred recently. The lender will also require an appraisal to make sure that the amount of money you want to borrow is in line with the value of the property.
Remember – this is NOT the time to start buying new furniture for your future home. Your lender will pull your credit right before closing – and if your debt to income limit has changed significantly, your lender could deny your mortgage application. Do not buy furniture, a car, a boat or anything that adds a lot of debt to your balance sheet.
Another “Do Not” is DO NOT change or quit your job. Lenders like to loan money to people with a consistent job history. If you quit your job, you will not qualify for a mortgage. If you change your job before closing, your lender will know – because they verify employment right before closing. If a new job is pending, talk to your lender. If your lender knows ahead of time, they can prepare for it. Just remember that mortgage companies HATE surprises!
A home inspection is critical before closing on a house. Your contract will specify how quickly you will do the inspections and what kind of inspections you will do. You can have a general inspection or more specific inspections such as an HVAC or chimney inspection or a mold or radon inspection. Remember that this is a case of “if you snooze you lose.” If you miss a timeline, you have missed your opportunity to do an inspection or ask for repairs. Typically home inspections contingencies are anywhere from three days to ten days. If you are in a hot sellers’ market, you may do your home inspection BEFORE you make the offer.
It is important to have a home inspection. Many serious problems are not visible, but they can be expensive to repair. The house should be thoroughly inspected by a professional who can spot issues with the roof, foundation, windows, plumbing, electrical system and other areas that need to be addressed. A termite inspection is often required and is a good idea even if it’s optional since termites can destroy a home and the damage can go unseen for a long time.
As the buyer, you’ll be responsible for the costs of inspections. If problems are found, you can ask the seller to have repairs made. If the seller refuses, you’ll have the right to renegotiate the sale price or to walk away. If repairs are made, the seller should furnish proof and you should have the property re-inspected to make sure the repairs were completed in a satisfactory manner.
A real estate attorney will handle the closing paperwork and distribute funds. The contract and the lender may have specific requirements regarding the qualifications and duties of the closing attorney.
You need to get homeowners insurance. Even if you don’t have a mortgage, you still want to get homeowners insurance to protect you against disasters.
Once a closing date has been agreed upon, the buyer and seller have to transfer the utilities. The seller contacts the utility companies and requests that services be canceled on that date, and you ask the utility companies to commence your services on the same day.
Sometimes the seller is nice and will extend the utilities for a day beyond closing. Others turn off the utilities the morning of closing. A smart buyer doesn’t worry about what the seller is going to do. Smart buyers just put the utilities in their name on the day of closing.
This is particularly important for the gas service. If the gas is turned off to the house, the gas company will not turn it on until they have access to the house to assure that it is safe to turn it back on. That means that you have to arrange to meet the gas company – and as you can imagine – the gas company doesn’t give you a specific time when they are going to show up.
The Closing Date is Sacrosanct
When you ratify the contract to purchase your new home, it will include a settlement date. This is the date that the seller, the agents, your lender and the title company all expect to show up for closing. If the date is not a good one for you, don’t pick it! If your schedule changes and you can’t make the date, tell your agent as soon as possible. The seller is counting on closing on that date, so if you need to change it, plan on moving settlement forward – not backwards. The seller may be closing on another property and may need the proceeds from your closing so he or she will not be able to delay your closing.
I just had a closing yesterday, which already had been delayed for a few days. Yesterday morning, the buyer went to Philadelphia for a medical procedure and was not able to drive himself back. He had to find someone to drive him back and did not get back to the DC area until well after 7 pm. Closing was completed at 9 pm. The transaction had to close yesterday because the documents all were prepared for yesterday and the bank had wired the money to the title company.
Do Your Part to Close the Deal
A lot of things need to happen in the relatively short period of time between an agreement to buy a house and the closing. Talk to your real estate agent so you understand each step in the process and what you need to do to help things move smoothly. If you fail to complete these steps in a timely manner, you could be in breach of contract and risk losing your earnest money deposit or you could forego important protections and rights under the contract. Pay attention to the timeline!
Give us a call at 240-401-5577 to set up a time for coffee and a thorough discussion of your timeline, expectations and advice on what to do to become a home owner!