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The House Closing Journey: A Detailed Checklist on What Happens After Contracts are Signed

The House Closing Journey: A Detailed Checklist on What Happens After Contracts are Signed

Embarking on the closing process on a house is a pivotal moment that signifies the transition from a signed purchase agreement to the final exchange of keys. This house closing journey, often averaging 50 days for those obtaining a mortgage, is punctuated by essential steps such as inspections, appraisals, and final paperwork completion. Understanding this progression is critical, as it can be a complex tableau of tasks where various complications, like appraisal disputes or title issues, can unexpectedly delay proceedings.

This article serves as a comprehensive home closing checklist, designed to outline the methodical steps to closing on a house and help prospective homeowners navigate the real estate closing process with ease. Readers will discover, from depositing earnest money to the seamless transfer of utilities, how to manage their house closing timeline efficiently. Addressing common queries like ‘how long does it take to close on a house’, this guidebook underscores each milestone through precise, actionable strategies—fortifying buyers against potential pitfalls in this conclusive phase of homeownership.

Deposit Earnest Money

Deposit Earnest Money

Once the contracts are signed in the closing process on a house, depositing earnest money is one of the initial and crucial steps to closing on a house. Here’s what buyers need to know:

  1. Understanding Earnest Money:
    • Earnest money is a deposit demonstrating the buyer’s serious intent to purchase and typically ranges from 1-3% of the purchase price.
    • It’s held in an escrow account by a neutral third party until the transaction closes.
  2. Purpose and Protection:
    • This deposit shows the buyer’s commitment and financial capability, while also giving the seller compensation in case the buyer backs out without a valid reason.
    • If the buyer exits the deal due to specified contingencies, such as a failed inspection, the earnest money is usually refunded.
  3. Payment and Verification:
    • Payment methods include personal check, bank-issued check, certified check, or wire transfer.
    • Title companies will verify these deposits to ensure the buyer’s legitimacy and ability to afford the down payment.
    • The Earnest money will be deposited in the escrow of the title company on the Oklahoma State contract.

      Security Measures:
  • To avoid wire fraud, secure payment options and security measures should be utilized. For instance, Title Company provides guidance on how to send earnest money securely.

    Final Steps:
  • Upon finalizing the sale, earnest money is applied towards the buyers closing costs.
  • It is crucial not to pay earnest money directly to the seller; use an escrow company to protect all parties involved in the home sale process.

    Prospective homeowners should always consult with their real estate agent to understand the impact of earnest money on their home search and budget, ensuring a smooth real estate closing process.

Schedule Property Inspections

Once you’ve deposited earnest money, scheduling property inspections early in the house closing timeline is vital. Here’s how to proceed:

  • Initiate the Process: Aim to schedule the home inspection as soon as the offer is accepted and you’re under contract. This allows ample time to address any issues that may arise.
  • What Inspectors Examine: Home inspectors will review various systems within the property, such as electrical, plumbing, roofing, and HVAC, in addition to major appliances. They also assess structural components, exterior and interior features, and ventilation to identify potential problems that could require costly repairs.
  • Finding an Inspector: Seek recommendations for qualified home inspectors from your realtor, then contact them to inquire about availability, the inspection process, and pricing. It’s crucial to ensure utilities are turned on for the inspection and that the property is accessible. We have also put together a list of inspectors here: https://www.brianallen.realestate/resources/real-estate-contractors-brian-allen-real-estate/
  • During the Inspection:
    • Be Present: Attend the inspection to ask questions and understand more about the property’s condition.
    • Review Findings: After the inspection, go through the report with your REALTOR® to decide on the next steps. This could include negotiating repairs or price adjustments based on the findings.
  • Post-Inspection Actions:
    • Negotiation: If significant issues are uncovered, your REALTOR® will assist to negotiate repairs or credits with the seller.
    • Decision Point: Be prepared to walk away if the seller is unwilling to address major problems reasonably.

      When scheduling, manage expectations by having an agreement signed and refer clients to the inspector’s website for detailed information. Paying the inspector directly at the time of service ensures their independence and accountability. Remember, a general home inspection has limitations, so understand what’s included and what may require additional specialized inspections, like for pests.

Submit All Mortgage Lender Documents

After the property inspections are scheduled, the next critical step in the closing process on a house is to submit all necessary documents to the mortgage lender. This documentation is essential to verify the buyer’s financial status and creditworthiness, which will influence the final loan approval. Here’s what to gather:

Required Documents for Mortgage Lenders

  • Uniform Residential Loan Application: Complete this form with personal and financial information, employment details, and the desired loan amount. It forms the backbone of your application and is a universal requirement across lenders. Here is a link to our lender partners: https://www.brianallen.realestate/finance/
  • Proof of Identity and Social Security Number: Provide a copy of your driver’s license or passport and Social Security card to confirm your identity and facilitate credit checks.
  • Income Verification:
    • Recent pay stubs and W-2 forms from the past two years.
    • Federal tax returns to verify income and deductions.
    • Checking and savings account statements to show cash reserves.
  • Additional Income Documentation: If applicable, include profit and loss statements for self-employment, documentation for rental income, alimony, or child support, and any other miscellaneous income sources.
  • Debt and Expense Statements: Disclose all debts with recent statements, including student loans, auto loans, credit cards, and any personal or medical debts.
  • Asset Documentation: Present statements for retirement savings, investment accounts, and any gift letters that will contribute to the down payment or closing costs.
  • Legal and Financial Records: Be prepared to submit records of bankruptcy, foreclosure, or other legal proceedings, if applicable. Those with thin credit files may need to provide alternative data.
  • Special Circumstances: If you’re purchasing investment real estate, a vacation property, or obtaining a nonconventional loan, additional documents will be required.

    During this stage, it’s imperative to respond promptly to any requests from the lender. Keep the house closing timeline in mind and be proactive in scheduling a home inspection, shopping for homeowner’s insurance, and reviewing revised Loan Estimates. As you approach the final steps to closing on a house, ensure that you review all documents before the closing date, and save and file all paperwork after the deal is closed. This meticulous attention to detail will help streamline the real estate closing process and answer the common query of how long does it take to close on a house.

Conduct an Appraisal

After ensuring all mortgage lender documents are in order, the next integral part of the closing process on a house is conducting a home appraisal. This step is essential for both buyers and sellers to understand the fair market value of the property. Here’s what to expect:

  • Appraisal Inspection and Research:
    • A state-licensed appraiser will carry out an in-person inspection of the property.
    • They will research recent sales of similar properties and consider current market trends to determine the home’s value.
  • Appraisal Report Contents:
    • The report will include a street map, exterior building sketch, square footage, and photographs.
    • Information on comparable properties will also be detailed, providing a comprehensive overview of how the home’s value was assessed.
  • Costs and Implications:
    • The appraisal fee, usually ranging from $300 to $550, is typically paid by the borrower. The lender will take payment for this service and is non-refundable.
    • A low appraisal can lead to delays or renegotiations, affecting the house closing timeline.
    • NOTE: Appraisers do not work for the agents nor do the agents have influence on appraisal. The agents do not find out whom the appraiser is until the set the appointment. This is controlled by a blind system the appraisers subscribe to.

      Appraisers must be impartial and well-acquainted with the local area to provide an accurate estimate. The appraisal process is a crucial juncture in the real estate closing process and can impact how long it takes to close on a house. If the appraisal comes in low, homebuyers have the opportunity to use this as a negotiating tool to potentially lower the sale price. Conversely, sellers can contest a low appraisal, especially if they believe their home warrants a higher value based on its condition or the market. For those refinancing, options like the FHA streamline program allow homeowners to refinance without a new appraisal, provided they have an existing FHA mortgage.

Review Your Title Commitment

In the closing process on a house, a critical step is to thoroughly review your title commitment. This document consists of several parts, each containing crucial information for prospective homeowners:

Schedule A – The Facts

  • Basic Information: This section lists the essential details such as the proposed amount of insurance coverage, buyer(s) names, current property owners, sales price, and the legal description of the property.
  • Effective Date: It also includes the effective date of the title insurance coverage, which is pivotal in the timeline of the closing process.

Schedule B – Notifications and Exceptions

  • Exceptions to Coverage: Schedule B outlines the specific exceptions that the title insurance policy will not cover. These may include:
    • Easements and right-of-way agreements
    • Restrictions and covenants recorded in the deed
    • Existing liens such as property taxes or assessments
  • Importance of Review: Careful examination of these exceptions is essential as they inform the buyer of any rights or claims that others may have on the property.

Schedule C – Requirements for a Clear to Close

  • Clearing Title Issues: Lists items that must be addressed before closing, such as:
    • Payoff of existing mortgages
    • Release of any deeds of trust
    • Settlement of unpaid taxes or labor liens
  • Finalizing Your Investment: It’s only after resolving all items listed in Schedule C that the title insurance policy is issued to protect the buyer’s investment.

    Reviewing the title commitment is a step that ensures compliance with lender requirements and helps minimize potential title issues. It’s a vital part of the home closing checklist, impacting how long does it take to close on a house. Buyers should also verify that all requirements are met before the closing day, which includes cross-referencing the Closing Disclosure with the loan estimate and ensuring all financial aspects are prepared for the house closing timeline.

Secure Homeowners Insurance

Securing homeowners insurance is a pivotal step in the closing process on a house, safeguarding the investment against unforeseen events. Here’s how to ensure this task is managed effectively:

  • Initiate Early: Begin the home insurance comparison process two to three weeks prior to closing. This timeframe allows for adequate evaluation of options and finalization of coverage details.
    • Coverage Confirmation: Choose an insurer and confirm the extent of coverages, then relay this information to your mortgage lender and the title company or closing agent to ensure all parties are informed.
  • Coverage Requirements:
    • Standard Protections: Policies typically cover the structure, personal belongings, additional living expenses if the home is uninhabitable, and liability for accidents on the property.
    • Additional Coverage: In certain regions, earthquake or flood insurance may be necessary and is often not included in standard policies.
  • Payment Arrangements:
    • Escrow Accounts: With a PITI mortgage, part of your premium will be deposited into an escrow account at closing. Subsequently, the lender will pay the premium from this account when due.
    • Direct Payment Options: If escrow is not required, payments can be made through various methods, including online payments, automated phone systems, or traditional mail.

      To align with the house closing timeline and avoid delays, ensure the policy is active at least three days before the closing date. This step, along with finalizing insurance, reviewing loan documents, and preparing for the walkthrough, is integral to the home closing checklist and impacts how long does it take to close on a house.

Transfer All Utilities

To ensure a smooth transition into your new home, managing the transfer of utilities is a key component of the closing process on a house. Here’s what to do:

  • Start Early: Begin the utility transfer process about three weeks before your move date. This gives you ample time to coordinate with utility companies and avoid any last-minute hiccups.
  • Contact Utility Companies: Reach out to all current utility providers, including electricity, gas, water, phone, internet, television, and garbage services. Inform them of your move and schedule the transfer. Be sure to:
    • Update your address with each provider.
    • Schedule the utilities to be turned on at the new home on the move date or a day prior.
    • Arrange for utilities at your current home to be shut off a day or two after the move date.
    • Confirm stop/start dates with both existing and new utility service providers.
  • Handle Financials:
    • Check for any outstanding balances and pay them off before closing day.
    • Gather information on current utility balances and any deposit refunds you’re entitled to.
    • Conduct a final reading of the gas, electric, and water meters at your old home to keep a record for potential billing discrepancies.
  • Additional Considerations:
    • If moving to a new city or area, research new utility service providers.
    • Identify if the Homeowners Association (HOA) covers any utilities.
    • Be prepared for a credit check during the transfer process.

      Remember to also update your address on important documents, such as your driver’s license and credit card accounts, after closing. Taking these steps helps maintain the house closing timeline and ensures that you can enjoy your new home without interruption.

Conclusion

Having journeyed through the intricate web of closing on a house, we have armed you with a thorough checklist to guide you seamlessly from earnest money deposit to the exciting moment you step across the threshold of your new home. The closing process, while complex, becomes more navigable with a clear understanding of each stage—ensuring you are well-prepared to tackle any challenges head-on and keep your purchase on track.

Your path to homeownership is now demystified, and with this knowledge, you can confidently move forward toward the final transaction. Remember, the real estate journey doesn’t have to be daunting—equipped with the right resources and guidance, you’re set for success. Don’t forget to solidify your preparation by downloading our checklist today, ensuring you have all the essential information at your fingertips for a smooth and successful home closing experience.

FAQs


What are the next steps after signing a contract to purchase a house?
After signing a purchase agreement for a house, the property is considered under contract. However, before you can fully transition to your new home, you must complete several additional tasks. These include placing an earnest money deposit, arranging for a home inspection, and ultimately, finalizing the transaction during the closing of your new home.

What occurs after all closing documents for a house are signed?
Following the signing of closing documents, the title company will verify the documents’ accuracy. After verification, the post-closing department can proceed to disburse the files. Initially, the closing package is sent to the lender for approval, which is a prerequisite for the title company to release any funds.

Can you outline the steps involved in the house closing process?
The closing process involves several steps: submitting necessary documents and responding to lender requests, scheduling a home inspection, obtaining homeowner’s insurance, keeping an eye out for revised Loan Estimates, shopping for title insurance and other closing services, reviewing all documents prior to the closing date, finalizing the deal, and securely saving and filing your documents.

How much time usually passes between signing the mortgage deed and exchanging contracts?
The period between exchanging contracts and the completion date typically ranges from one to four weeks. However, it is possible to exchange contracts and complete the purchase on the same day, although this can be quite a challenging and intense process.

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