Before Closing on a Home
Your home buying process is well underway. The sellers accepted your offer to purchase. The home is officially under contract and you're counting down the days to closing. The lender pre-approved you, so buying the house is a sure thing, right?
Not quite. Nothing is certain until the keys are in your hand and the deed is recorded. There are still hurdles to get past before it's yours, and your actions between now and closing can create headaches, slowdowns and even stop the transaction.
1. Don't Make a Major Purchase
You've just found out your credit is A+. That's great news, because a new car would look fantastic in the driveway of your new home. But hang on--if you are depending on a mortgage to move in, you'd best wait until after closing to buy that car. An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment. If you tack on a higher car payment, the bank might decide you can't afford the home. Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.
2. Don't Change Jobs Unless
It's Necessary
Lenders like to see a consistent job history. They aren't
usually as nervous if you change jobs within the same field, but
it's better to stay put until the house is yours.
3. Don't Give an Earnest Money Deposit Directly to a For Sale
By Owner Seller
Your good faith deposit should go into a trust account. Some for
sale by owner sellers don't understand that funds are not their
to spend until closing. I've heard many stories about sellers
who spent the deposit money prior to closing. When the
transactions didn't take place for valid reasons--such as
financing or repair issues, the buyers had to fight for a
refund. Find an attorney or other neutral party who will hold
the deposit for you until closing day and make sure your
contract dictates what happens to the funds if the transaction
doesn't close.
4. Don't Let Your Emotions Take Over
Keep a cool head during the entire home buying process,
especially during and after a home inspection. Be realistic. No
home is perfect, especially older homes. It's not unusual for
new owners to take care of some repairs themselves. Don't let
the seller's refusal to do a small repair kill the deal on a
home you truly love. On the other hand, don't fall so much in
love with the house that you'll buy it no matter what needs to
be done--unless you're sure you can handle it emotionally and
financially. Decide what type of repairs you can realistically
tackle, then stick with the decision.
5. Don't Forget to Switch Utilities
That sounds simple, but you'd be surprised how many people
forget to apply for utility service at their new home. Call the
utility companies as soon as you have a contract. Find out how
many days lead time they need to switch the service, then get
back with them when you have a firm closing date. Don't forget
to discontinue services at your old home.
6. Don't Forget to Line Up Your Hazard Insurance
A no-brainer, right? But it's another often-forgotten task that
buyers scramble to take care of at the last minute. Before
closing, your lender will want to see an insurance binder
showing you have coverage for the new home. Get it as early as
possible so that closing isn't delayed. In some locations,
additional types of insurance coverage might be necessary. Talk
to your lender about insurance requirements well before the
closing date.
7. Don't Become Best Friends with the Seller
I'll get some flack on this one. It's great to be friendly, but
don't get into too many long discussions with the sellers,
because personality conflicts often cloud judgments. Remember,
this is their home. You're no doubt excited about moving in, and
if you didn't like the house you wouldn't have offered to buy
it. But you'll make changes--everyone does. A casual statement
about "ripping up that ugly carpet" might be hurtful enough to
keep the seller from negotiating with you about repairs or other
issues that crop up.
8. Don't Panic if the Appraisal Comes in Low
At least not at first. There are some things you (and your
agent) can do to correct the problem. Study your options.
9. Don't Go It Alone
If you're working with an agent, it's the agent's duty to track
many of the day to day details that involve the lender, the
seller, or the seller's agent. Be sure your agent schedules a
final walkthrough just before closing.
10. Don't Ignore Lender Requirements
Know what is expected of you and take care of it. For instance,
a Certificate of Eligibility is required to move forward on a VA
loan. That's something you must handle yourself. Answer lender
questions and provide required paperwork as quickly as
possible--moving into your new home depends on it.
Buyer's Guide
Tips for First Time Buyers
Buyer Frequently Asked Questions
10 Things Buyers Should Avoid
What To Do First: Buy or Sell?
Making an Offer
Inspections
Simplify the Home Buying Process
Relieving the Stress of Packing
Land Buying Advice
Real Estate Glossary
Facts About Easements
Facts about Radon & Radon Testing
Lead Based Paint Facts & Disclosures
Mold in the Home
Saying "I Do" to First Homes
What is a CMA and Why Do You Need One?
How to Negotiate with Sellers
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