Home Buyer's Guide: 10 Steps Toward a Smooth Closing
By Jeremy Osgood, Realtor, Berkshire Hathaway HomeServices Spencer-Hughes
The process of buying and selling a home has dramatically changed over the past several years, with more legal oversight, lending restrictions and paperwork than ever before. Signing the Purchase and Sales is the just beginning, not the end of the process. Even the most credit- worthy borrowers are being scrutinized carefully, as banks closely evaluate homes they once rubber stamped.
I can help you prepare by sharing my knowledge of how the home buying process works, and making sure you have all the paperwork finished beforehand. This cuts down on phone tag, late night paperwork searches and last minute stress.
Here are ten things I can walk you through to ensure a smooth closing:
1.) Locate and get pre-approved by a lender. Rates are a moving target, so let’s contact a local bank, a larger area bank, and maybe have an experienced mortgage broker shop rates for you. Whomever you choose, the process will go much smoother if you can meet face to face with a bank representative or mortgage broker who is accountable to you. The bottom line is: face-to-face people hope for future referrals. Most can’t afford unhappy clients in a market like this. Conversely, Internet shopping carries the risk of being dropped after a lot of work.
2.) Have your loan documentation together, to save time:
Two most recent paystubs (for income verification);
W-2 forms from past two years;
Two months of bank statements;
If self-employed, need last two years' tax returns;
Let them know if you’ll be using gift funds as part of your down payment;
Any large deposits prior to closing will be questioned, so maintain a paper trail;
Make them give you an estimate (HUD) so you can make an informed decision. Closing costs, insurance requirements and transfer tax are some of the costs involved, in addition to the loan.
3.) Schedule your home inspections. As soon as you have a signed Purchase and Sales, let your inspector know if you have special inspection requirements that can come with government guaranteed loans, such as, FHA, NH Housing, or Rural Development. NH Housing, for example, will request a copy of the inspection and factor their loan commitment based on the condition of the home, water, and air test results.
4.) Know your contractual obligations. Your second deposit is due after satisfactory results of the inspection process. The second deposit amount is specified in the Purchase and Sales and the check is made out to the firm specified in that same section of the contract. Escrow funds are credited toward the down payment.
5.) Prepare an Insurance Binder. The lender is going to require an insurance binder on your new home and will have special instructions for the binder. You are free to go with the insurance company of your choice, or I can arrange an estimate for you. Sometimes you can get discounts on Home Owners Insurance if you group the policy with your existing car insurance or other coverage. However, make sure the homeowner coverage fits your needs.
6.) Transfer All Utilities. Remember to call in advance to have electric, phone, cable, and heating fuel scheduled to change over to your name, so that you can enjoy your new home upon closing. In most circumstances you are required to pay the previous homeowner for the fuel that is in the tank when you take possession. The day before closing, the fuel gauge will be verified and you may need to bring a personal check to cover the cost of what’s in the tank.
7.) Avoid the Underwriter's Wrath. We Realtors often jokingly call bank underwriters, undertakers, because they are notorious for killing deals at the last minute. Just when you think you are home free, the underwriter comes in to make a final determination on whether to approve the transaction. The worst thing you can do in the weeks leading up to a transaction, other than get divorced, is to make a large purchase or show an unusual deposit that can trigger a time-wasting audit.
8.) Give your closing funds time to settle. If you have to move funds around to bring money to closing, make sure you mail or wire the funds so they have time to settle. Everyone assumes that wired funds are available either the same day or the next day for the closing, but wiring funds is no longer a same-day guarantee. Check with your bank and the closing representative to see how long it will take the funds to clear. In most circumstances, funds are available within three business days, but you need to verify to avoid delays that take you out of a contract.
9.) Remember your identification. Be sure to bring your driver’s license to closing.
10.) Choose the right real estate agent. One of the best decisions you can make early on in the process is choosing a good, conscientious real estate agent that can guide and walk you through the bumps in the road, and more importantly, anticipate roadblocks in achieving your objectives. Good agents have an extensive local network of inspectors, lenders and consultants at their disposal that can really save you time and headaches throughout the transaction.
For more information, contact Jeremy Osgood at our Wolfeboro, NH, office.