Before you sign on the dotted lines, ask yourself these six crucial questions.
- WHAT AM I BUYING?
Make sure you have done your due diligence and inspected the property thoroughly. This could be the biggest investment you ever make (emotionally as well as financially) so know what you are getting yourself into before you seal the deal.
- WHAT SORT OF LOAN AM I GETTING?
Before you close you will get a stack of papers ten reams high and you will be signing and initialing every last one of them. Make sure you know what you are signing – is the interest rate the attractive one you were quoted when they were begging for your business? Do you have a pre-payment penalty? When is your first payment due and where do you send it? All important questions to ask and have answers to before you seal the deal.
- HOW MUCH MONEY DO I NEED?
You may have your loan in place, but you will probably have to come out of pocket to close on your new dream home so where is that money coming from and how is getting from THERE to the escrow account in order to close on time? You will need to check with the closing attorney to see if they prefer you wire the money or bring a certified check.
Make sure all parties involved have the proper information to wire funds, pick up checks and get it done so your close is not held up while you are already paying interest on your funded loan.
- IS EVERYTHING TURNED ON?
Have you transferred the utilities into your name and avoided unnecessary costs to have them turned on if there is a gap between you and the previous owner’s shut-off date? Ensure that you have addresses, account numbers and all contact information for the following:
-Utilities (electric, gas, water, trash)
And make sure your loan offer/closing attorney has all the information they need (such as contact info for your insurance company) in plenty of time before the close.
- DID THE PREVIOUS OWNER HOLD UP HIS END OF THE BARGAIN?
You may have negotiated some repairs during escrow – did you receive a credit for them and is it on your closing statement? Did the previous owner complete the repairs they agreed to do and are they up to code?
If you have realtor, rely on them to hold the seller accountable. Make sure you have checked it out before your close as there is very little recourse once the previous owner has your money!
- AM I AWARE OF (ALL OF) MY CLOSING COSTS?
When it comes time to close on your property, it may seem as if everyone and his brother is waiting for a handout. They are. All these fees together make up your CLOSING COSTS and PREPAIDS. We tend to lump all money that you are required to bring to closing as “Closing Costs”, but they really are made up of Closing Costs and Prepaids. Prepaids are required to establish your Escrow Account. The Escrow Account is what is established if you have a mortgage, the mortgage company will keep an escrow account to hold your money each month so that property taxes and home insurance can be paid annually by the mortgage company out of your escrow account. Each month you will pay your mortgage and interest and also pay into your escrow account.
These charges can and do vary widely, but don’t be surprised to see these charges:
Closing Costs —Who will pay (buyer or seller) is usually decided during the negotiation on the sale. Splitting these fees is common. These fees are made up of the lender origination fees, attorney fees, and title search fees. Credit check — Yes, you have to pay for your lender to verify your loan-worthiness. Document prep fees and Title insurance — A lender won’t give you any money without guaranteeing its interest in the property. Title insurance covers you in the unlikely event that there’s a blemish on your property’s title history. Miscellaneous fees — A courier is employed to transport your paperwork from the title company to the escrow company. Money is wired from your lender to your seller’s account. Your lender incurs an underwriting fee and passes it on to you. Count on a few hundred dollars worth of “misc. fees.”
Prepaids—The mortgage company normally requires several months of property taxes and home insurance to be deposited into the escrow account at the time of closing, this is collected at closing and will be included in the cash the buyer brings to closing .
**In contract negotiations, when we referenced “Closing Costs”, we are referring to Closing Costs and Prepaids.
Information from Realtor.com