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Your offer has been accepted. The deal is done, almost. The next step is known as the closing period. In this process, once a price has been agreed upon, a contract is drafted by the seller’s attorney and sent to the buyer’s attorney for due diligence. During the due diligence period, which usually lasts about 5 to 7 days, the buyer’s attorney reviews the contract, title, any pending violations, offering plan along with the condo or co-op’s board minutes. During this entire closing process, there are important conditions and steps you must take to ensure your approval.
Finding a Lender
The first step in the closing process is finding a lender and, unfortunately, this step is one mistake that homeowners tend to make. Whether it’s a bank or mortgage brokerage, chose one that best fits your needs and payment plans. Your lender must give a good-faith estimate including a detailed list of closing costs within three business days of your loan application.
Image via Flickr by thinkpanama
Title Company and Homeowner’s Insurance
Once you have secured your financing your lender will then conduct a title search on your property to make sure that there are no claims such as property written in a will, tax debts, any liens or child support. In this step, you will have to purchase title insurance which protects your financial investment if a claim does surface. You will also have to purchase homeowners insurance which protects you and your mortgage company. Both will need to be purchased before your lender approves your loan.
Home inspection and pest inspection are contingencies included in the purchase agreement. If the home inspection reveals severe damage and that was one of your contingencies, you can back out of the deal and request a lower price or request the seller fix the damage. The same is true for pest inspection. Once these are done, an appraiser will come and evaluate the true value of the property to make sure it matches the selling price.
Most agreements have contingencies. These are set up with deadlines to protect the buyer. Most common contingencies include loan approval with affordable interest rate and mortgage payment, home inspection revealing no major problems, pest inspection revealing no infestation, and seller fixing everything agreed upon.
Once all terms and contingencies are met and a loan commitment has been received you are then cleared to close. A final walk through will be conducted to check that all repairs are done. This is also the day of closing to make sure everything is in order.
This actual date is dependent on the approval of your loan, but making sure that your lender has everything ready will help speed up the process. On closing day, you will receive several documents including HUD-1, Final TILA, Mortgage Note, Mortgage or Deed of Trust, and Certificate of Occupancy, and you will have 24 hours to sign these. Make sure to read everything and that you don’t sign papers with blank statements. Once these papers are signed and your loan is approved, the deed and keys are handed over. You are officially a homeowner.
While this is a complex process, with the right team by your side it will be smooth sailing.