Closing on a home can seem like a daunting process, especially if you’re a first-time home buyer. Here is a beginner’s guide to closing on a home that will streamline the process and have you settled in your new house in no time.
1. Choose A Settlement Agent…
A settlement agent is also known as an escrow agent or closing agent, and they function as a neutral third party who oversees the transfer of the property. Their job is to coordinate document signing, verify that buyer and seller have met agreement terms, pay out, title transfer, and deed records.
2. Or a Real Estate Attorney
Some states require that your closing agent is a real estate attorney. This gives additional assurances as to the legality of the purchase. Having said that, sometimes its wise to hire an attorney anyway, either as your settlement agent, or in addition to the agent. It’s always wise to have someone looking out for your legal interests.
3. Homeowners Insurance
If you are taking out a loan to buy your home, you are required by the lenders to buy homeowners insurance. The insurance policy must be brought with the other documents to the closing. Insurance coverage cost is variable, depending on location and company. You can make use of a seller closing costs calculator to see how it will impact the overall expenses.
4. Title Insurance
Buying a home means buying a “title” to the property, which means you are the sole legal owner. Title insurance protects you against any claims from persons that the property belongs to them. It is a one-time payment rather than an ongoing expense. Your lender will require you to purchase title insurance. The cost varies, but averages out at about $1,000.
5. Confirmation of Loan Conditions
Your lender will have set conditions for the loan, and all of these have to be met before the closing. Standard conditions include a clear title report, proof of insurance, income documentation, and an appraisal figure for the loan.
6. Closing Disclosure
A closing disclosure is a nationally standardized form that itemizes the closing costs to you and the seller. It also outlines key information about the loan.
7. Final Walk-through
You should schedule this final look at the home with your real estate agent, and it should be done within 24 hours of the closing. This is to make sure the previous occupant has moved out on time, and to make sure any issues that were to be corrected have been handled.
8. Gather Documents
You will be given a list of the documents you need to bring to the closing. These are:
- Photo ID
- A list of addresses from the past 10 years
- Homeowners Insurance Policy
- A cashier’s check for “cash to close” which are the closing costs and down payment
- Checkbook
9. Legal Transfer
The last step in the process is the final legal transfer. Mortgage documents are signed, as well as any other documents required. Payments are exchanged, and you receive the keys to the home.
10. Homestead Declaration
A homestead declaration, also known as a homestead exemption, registers your home with the federal and state governments as your primary residence. This protects you in bankruptcy, with property taxes, and with a spouse’s right to stay in the home if the homeowner passes. These declarations can be attained at the county assessor’s office.