How Closing Works
The home buying process is full of paperwork, important dates, contracts, market movements and checklists that can even overwhelm seasoned real estate investors. One of the main reasons to make sure you’re working with a professional real estate buying team is the fact that you get to lean on their combined experience to ensure a smooth and painless closing.
Closing Process Basics
The closing process can be argued as the most critical part of a real estate transaction where the most amount of things can go extremely wrong. This is where that professional team will really prove their value. We’ve listed a few bullets, links and frequently asked questions on this page to help highlight a few important topics you may want to be aware of during the closing process.
01. Income/Asset Documentation
You may have supplied your lender with a mountain of documentation, but make sure you continue to save all of your new paystubs and financial statements as you move through the process. Chances are your lender will want updated documents as you get closer to closing.
02. Credit Inquiries
If you have had recent inquiries on your credit report, a lender may check to see if any new credit has been extended that may not yet actually appear on your report. An inquiry could be for something minor such as a new cell phone, but can also be something that will impact your ability to qualify for the loan, such as a car payment or another loan that you co-signed to help out a family member.Learn More
03. Employment Verification
Your lender will be making sure you are still actively employed in the position that is listed on your loan application, and they will do this more than once in the process. So make sure regular life events, such as maternity leave or a scheduled surgery, have been brought to your loan officer’s attention ahead of time. Once an underwriter starts to uncover surprises, they may hold a file up for a while to do a bunch of unnecessary digging to find out if there are any other issues that the borrower failed to mention.
04. Funds for Closing
Lenders will want to source where every dollar for the transaction is coming from and verify that it has been deposited into your bank account. If funds need to be liquidated from a retirement account or home equity line start the process sooner rather than later. Sometimes lenders will not release all of the funds immediately after a large deposit so it is important to have these in place well ahead of your closing date. The same applies for gift funds – make sure the donor is aware of your time frame and is willing to supply the required documentation to your lender.
05. Title and Judgment Searches
Typically, title and judgment searches are performed farther along in the mortgage process because they are not ordered until after you receive your mortgage commitment. These searches could reveal judgments against your name or the sellers along with liens against the property you are buying or selling. Sometimes, even an old mortgage appears against the property since it was never properly discharged, or if you have a common name items could appear that are really not yours. Either way, the underwriter and title company will want to be sure that these are cleared up before the closing.
06. Insurance Coverage
Lenders want to review your policy several days prior to closing to make sure coverage is sufficient and accurately account for it in your monthly payment. Insurance coverage can sometimes be difficult to obtain depending on your past history with claims, credit, location and type of the property.
Closing Process FAQs
Does it matter which day of the month I close?
The date of your closing is all about how you view the money being applied. Pay now or pay later, but it will always be collected. As far as closing on a particular day of the month to save money on interest payments, it depends on the type of loan program you are using. If you’re more concerned about successfully closing with the least amount of stress, then early to mid month is usually the best time to close.
I am refinancing an FHA loan, will it benefit me to close in the beginning of the month?
No, in fact FHA refinances should always close at the end of the month because you are responsible for the entire month’s interest.
Should I be concerned about the closing date on a conventional loan refinance?
Not really, however you can save a couple dollars by closing early in the month, just avoid closing on a Friday because you could be responsible for the interest on two loans over the weekend.
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