On Your Way Home...to the Closing!

Now that the Purchase and Sale Agreement is signed, the only thing to do now is wait...right?

I wish it were that easy. Though it doesn't seem like much goes on from here on, there are many important things that need to get done. Fortunately for you, most of the work is performed by your REALTOR, the closing attorney, and your mortgage person.

The biggest responsibility you have right now is to stay in contact with your mortgage person and get him all the information and documentation he ask for. Getting a mortgage isn't as easy as it was back in the mid 2000's when lenders would give anyone with a pulse a mortgage, many times without proving income. Since the mortgage industry's big fallout in the late 2000's where investors took a bath in bad mortgages, lenders have been scrutinizing every mortgage applicant. Just give them what they need as quick as you can, and everything should go smoothly.

One of the parts of the mortgage process will be to get an appraisal of the property you are buying. The bank wants to make sure you are getting what you paid for, right? Wrong, the bank wants to make sure your ho me is worth what they are investing, just in case you decide to stop paying the mortgage and they have to foreclose. They want to be able to sell your former home and recover their money. But that's not going to happen, so don't worry about it.

What you will find is that the appraised price of the property is almost exactly the same as the price you are paying for it, even if you think you got a great deal. That is because the bank's appraisal is only trying to prove that it is worth what you are paying for it, not market price or actual worth.

In some cases the appraisal comes in lower than what the buyer is paying for it. One of four things will happen in this case. If the lender finds an issue with the current appraisal, a new appraiser may be called in to give a new appraisal price. If the appraisal looks good, then we have to renegotiate the price with the seller. Usually the seller has no choice but to lower the sale price down to the appraisal price. But sometimes a seller will hold their ground. In that case, we choose one of our last two options - withdraw from the transaction, or proceed with the purchase. The problem with proceeding with the purchase is that it throws your mortgage ratios off and you may either no longer qualify for a mortgage, or the lender may charge you a higher interest rate. This is something that needs to be discussed with your mortgage person and your Realtor. Hopefully it doesn't happen.

You will also need to take out an insurance policy on your new home. Typically, the lender will want the insurance paid for the year in advance. If you are buying a condo you may not be required to buy unit insurance, but it is a very good idea to do it any. The master insurance covering the complex does not protect the interior of your unit.

The closing attorney will order a survey for the property. This is to make sure that the neighbor's buildings and structures do not encroach on your property, and that your buildings aren't on your neighbor's property. This is not an instrument survey, and is therefore only accurate to about a foot or so. Fences are usually not included in the survey for that reason.

The closing attorney will also order a title abstract. This shows the previous owners over the last 50 or so years. It will also show all mortgages, any tax or other liens on the property, law suits, etc. He makes sure that you receive a clean title, that is, he assures that any issues that are filed with the registry of deeds have been resolved and all mortgages are paid off so that you don't become responsible for them. The closing attorney will also offer you title insurance to protect you against anything the title examiner may have missed, or for things that were never recorded at the registry. It is highly recommended to obtain this insurance.

About a week before closing you will want to call all the utility companies - gas, electric, phone, cable, etc., and arrange to have the service transferred to your name. Your Realtor will remind you of this.

About a day or so before closing you will want to do a final walk-through of the property you are buying to make sure it is in the same condition as it was when you made the offer. Your Realtor will arrange that for you.

You will also hear from the closing attorney about the final amount of funds you have to bring to the closing. This will have to be given as a cashier's check.

The closing will take place at the registry of deeds or at the closing attorney's office. Along with the cashier's check you should bring a photo ID, your home insurance binder, and your checkbook - just in case. If the home uses heating oil or propane, you will be responsible for paying for the amount that is left in the tank(s). This may be included in the final amount that the attorney gives you, or you may have to write a separate check directly to the seller. The attorney will let you know.

The closing typically takes about an hour, but it can vary by the amount of paperwork to be signed (there will be a lot!), and how much explaining the closing attorney has to do. The most important documents at closing are the HUD-1, which shows all the closing costs, and where and to whom the money is going, the deed, the mortgage and the note. After all the paperwork is signed by you, the buyer, and the seller (who has relatively very little to sign), the deed and the mortgage are recorded at the registry of deeds. Once the deed is recorded, you are the new home owner!

Congratulations!