Finally, after perhaps months of preparation, the day you?ve been dreaming of has arrived. You?re ready to celebrate with a champagne dinner. You deserve to celebrate, but beware, it?s not truly over until it?s over. Keep in mind, this last foray into home ownership, usually, is not without some last minute pit falls. Very few closings occur without some small problems. It?s during the final stages of the transition that Murphy?s Law , "Whatever can go wrong can and will," is bound to kick in. It is very important; you be aware of possible problems so as to head-off any problems that can occur. Some parts of the country have an escrow firm, title company, or other agency as an impartial and objective company that; holds the earnest money, supervises the paperwork and then distributes the money when the terms of sale have been met. In Colorado, either the listing broker or the title company will typically hold the earnest money until closing. Here it is normally the title company who conducts the closing and makes sure all the preliminary detail work has been completed in a timely manner.
One of the more confusing aspects of home buying is the title insurance. There are two types of title insurance, the lender's and the owner's. The title insurance exists to protect you, as the buyer, from any claims that could be brought against the property you?re buying. The title insurance gives you a guarantee, that once you have bought your home you own it, or else, the title company must compensate you for damages. Examples are claims against the title, such as, mortgages that haven?t been satisfied or ownership disputes. Good title insurance will cover increases in the value of your property many years down the road. Many lenders will require a title search be performed and also require that buyers purchase title insurance to protect their investment. Title insurance should not be all that expensive, and it is advisable that you never agree to buy real estate without making title insurance a condition of the sale, even if you pay cash for your property or the owner is going to hold the mortgage. Without it, you will have no protection from Murphy?s Law taking effect.
Remember to take in to account that there are may occasionally be unexpected costs to contend with even during the most smoothly run closing. It could be the compensation you need to pay the seller for fuel left in a tank, or it could be a myriad of other miscellaneous things. The more you plan for them the better things will go at your closing. You will be prepared in advance for the fees that you will be expected to pay beyond the earnest money and down payment. Your loan officer is obligated to provide you with a "good faith" estimate of these costs at the time you make the loan application. Closing costs may include: recording fees, interest on the new loan from the day of closing through the last day of the current month, legal fees, title insurance fees, pro-rating of the current years property taxes, prepayment of the homeowner?s insurance, mortgage insurance, and other miscellaneous items depending on the local laws. Prior to the actual closing your lender and your Realtor will review these items with you and provide you with the exact amount you will be expected to bring to closing with you prior to closing. Remember, don?t be afraid to ask questions if you don?t understand something.
One of the fees you may see, is mortgage insurance. Mortgage insurance exists to protect the lender in the event you are unable to make your payments and default on your loan. Most lenders make this insurance mandatory if your down payment is less than 20%. Once you have owned your home for a certain number of years, and your home has appreciated in value to a point where you have at least a 20% equity basis, you may notify your lender and they are required by law to remove the mortgage insurance from your payment. The exception to this rule is with an FHA loan. The current FHA guidelines require you to pay mortgage insurance throughout the entire life of the FHA loan.
It is a good idea to schedule an appointment with the seller, through your Realtor, for a final inspection of the property once you know that everything has been completed. This is known as the "final walk-through". It should normally take place the day of, or just before, the closing. This is a good time to take note of any items you thought were coming with the house that may be missing. It is also your opportunity to make sure that any agreed upon repairs have been made and that the property is in the same condition as it was at the time of contract, ordinary wear and tear excepted. Take a notebook to jot-down any new items you discuss with the sellers, and have them sign it.
At the closing table you will sign numerous papers and checks. Be sure to read everything carefully, and ask questions if you don?t understand something. Your Realtor should accompany you to the closing and should be able to quickly and easily explain any items that you are having difficulty understanding. Patience is a Virtue Closings take time. They have been known to take days, but most take no more than an hour or two. Be sure to keep your schedule open the day or closing, just in case. Closings don?t stop unless there is something wrong with the sale. Any problems are usually worked out on the spot and the closing continues. Once the papers are signed, the seller hands over the keys, and you finally are able to know that your new house is all yours. Now is the time to celebrate! The home that you have worked so hard to own is finally yours!
