Now that you have a contract, everything shifts into overdrive to get the deal done. There are several things you will need to do before close. You’ll need a closing company to help you with the transfer of the Title from the seller to you. That company will inspect the Title on your behalf to make sure the seller is able to transfer the house to you free and clear of any liens or encumbrances. If there are any liens or a mortgage against the property the closing company will make sure those are paid off on closing day from the money you are paying to buy the house. This research takes about two weeks and will most likely be done before your lender is finished with his part.
During the five days after the contract is signed you will take your contract to your lender and start the underwriting process. Since you’ve already been talking to him about your purchase and you’ve given him enough information to get your pre-approval letter you will be moving to the next step in the loan process. The lending company will tell you not to do any shopping for furniture just yet! In fact, don’t make any major changes in your financial situation. Don’t change jobs, don’t apply for credit, don’t buy anything with the credit you already have. Everything needs to stay the same for thirty days while they get the loan in place. Even if you looked good on paper when you got the pre-approval you could jeopardize your purchase by adding debt to your credit rating before you close. If any of these things do happen outside of your control, tell your lender immediately. In the meantime your lender will send an appraiser out to the property to verify that the house is worth the price you are paying.
During the first ten days after the contract is signed, you will do your inspections of the property. Don’t skip this part! It will cost roughly $550 but it is money well spent. You are making the purchase based on the way the property looks to you on the surface. But if there is a major fault in the property it might change your willingness to purchase, or at the very least affect the negotiated purchase price. You have the opportunity to inspect every aspect of the house. Remember you also negotiated a repair cap into the contract that was a dollar-amount the seller automatically agreed to spend to do needed repairs. Above that amount any other repair costs would then be negotiable. You should not consider this repair money as a way to “nickel and dime” the seller with a lot of trivial repairs. But if something needs attention you will make that request on the TRR (Treatments, Replacements, and Repairs) form.
Also during the first ten days you should call your hazard insurance company and apply for home owners’ insurance. In Oklahoma we have an issue with bad weather that can beat up a 25 year roof and reduce its usable life span to half that long. The insurance company will inspect the house to verify that it is insurable. That includes the roof.
You should know that as your agent I can help you with recommendations for any of these services including a reputable insurance company, Title company, and certified inspector. But you don’t have to take any of my suggestions. You can choose all of your own companies without my input. Do what you feel on this one.
All of these items will be finished by the time the lender gets your file out of underwriting. When that happens you are ready to close! Your contract included a scheduled date for closing but you can close early if everyone agrees. The contract also has a default five day grace period to close if you need just a bit more time to get everything done. Try not to use this grace period. The closer you get to the closing date the more stress everyone is feeling. Get it done on time to leave everyone smiling at the closing table.
Finally, most of the time everything goes smoothly but sometimes the best laid plans go bust. Since you put up earnest money in the beginning you’ll want to know under what circumstances your earnest might become jeopardized. There are three things that can kill a deal. If you find something wrong with the house during your inspections that changes your mind about your purchase you may cancel the contract without loss of your earnest money if you do it within the first ten days. Under most circumstances if your loan is denied or if the house doesn’t meet appraisal your earnest will be returned. But if either of these things happens deep into the closing process after the seller has spent money to ready the house for you, some or all of your earnest money could be forfeited. But even in this situation you will have to agree and sign off on the disbursement of the funds to the seller before any of your funds will be released.
You should also know that if the house is uninsurable this does not release you from your commitment to buy the property. That is why it is important to call your insurance company during your initial ten day inspection period. If this is discovered during that first ten days you may cancel the contract without loss of your funds.
The day before closing day you will receive a closing statement from your closing company that will spell out every penny you will spend to close. All charges, credits, taxes, fees, credit for your earnest money, and the cost of the property will be included. At closing you will pay in advance for your one-year hazard insurance policy. Additionally, you will pay the equivalent of 25% of the total cost of that policy into an escrow account that the bank will set up for you. You will pay 25% of the projected amount of yearly tax into the escrow account as well. Part of every monthly payment to the bank will also be collected and deposited here. In December the lender will pay your property taxes from this fund. On the anniversary of your purchase they will pay the insurance company to keep your hazard policy in force.
You’ll be at the closing table for up to two hours signing documents for the lender and the Title Company. But when you’re finished you will own a home! Be sure to get all of the keys. Then change out all of the locks. It is now your home after all.
If you’re thinking about buying a home, I can help you. Call me today at 918-809-5199 and we’ll get started!