What to Know Before you Close

By: John Mejia

You've done your shopping, found a beautiful, functional home close to everything you need, and your offer has just been accepted. Before you close the deal, here are a few things to consider.

Unlike renting in which you pay in advance for the upcoming month, a mortgage is paid "in arrears". This means you are paying back the past month's worth of your loan after the month has passed and the interest accrued during that month is included in the payment. Say, for example, you close a sale on June 29th. Your first mortgage payment will be due on August 1st. If, however, your close occurred in the middle of June, that half a month's worth of loan interest will be due at the time of close. Because of this, it can be advantageous to close a sale at the end of a month rather than the beginning. By closing later, you save yourself needing to have that extra money on hand right at closing. You don't really save money in the long run, but considering all the expenses involved in buying a home and moving, not having to pay half months worth of interest right then and there can really help.

There's another reason why closing later is a good idea. Let's take our example again, and the closing date has been set for June 15th. Knowing the sale is imminent, and that a payment isn't technically late until after the 15th of the month, the current owners of the home you are purchasing may decide not to make their June 1st mortgage payment. If this happens, you will have to pay not only for that half of June, but also May's mortgage payment as well, all at the time of close. While we hope that a seller wouldn't do this, it has been known to happen, and setting close date at the end of the month is a good way to prevent this.

Another thing to make sure of is that you don't take out another loan right before closing. Most lending institutions will do a second credit check right before finishing the closing paperwork, and another loan may jeopordize your mortgage loan. So as much as it might seem like a good idea to get a new car or TV to go along with that new house, resist the temptation, even if you think you can afford it. Waiting until after your real estate purchase is complete assures that the process will go smoothly and reduce the stress of the buying process.

Speaking of stress, it is common for buyers to get second thoughts or feel worried about the purchase they are about to make. To prevent this, a final walk through of the home is recommended. Check everything you may have overlooked in your initial excitment, such as electrical outlets and any appliances that will be included in the sale. Examine the foundation and the roof, turn on faucets and flush toilets. In short, make sure that everything is in complete working order, that no changes have been made to the home since your initial decision to buy it, and that any promised renovations or clean-up has in fact occured. Also, make sure you know what to expect in regard to any maintenance fees that may be included in the home, such as water, garbage collection or landscaping. If the home you are buying is being constructed, make sure the builder signs a contract that includes exactly what you expect to be built and when it will be completed by. In this way, you will know exactly what you're getting, and save yourself from any surprises at the time of moving in.

Another way to reduce the stress of the overall move is to assure that all your personal service providers have been notified of your move. Don't forget that all your mail will need to be redirected, and the utilities put into your name. If a house has been empty for a time, electricity, water and cable may need to be hooked up. And don't forget to hire movers and get an estimate on the cost so you know what your total moving expenses will be in advance. Arranging these things early on makes everything easier when you move.

Finally, make sure the money you will need for the closing process is deposited before coming to close. Your payment should be in the form of a direct transfer, money order or a certified check, not a personal check.

Hopefully, with carefull planning, the process of buying will be fun!

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