The closing table is the last stop before you walk into your new home. Here’s how to prep for the process and avoid any last-minute homebuying headaches. When they announce “closing time” at a bar, it’s a cue to pay your tab and head home safely. Buying a home is no different, only this closing time comes with a lot more paperwork.
Knowing what to expect, though, in that pile of paperwork and how to be prepared can make the process go a lot smoother.
For starters, plan to have all your financial ducks in a row well in advance of your closing date, says Jeremy Gulish, a Realtor with Keller Williams Towne Square Realty, Morristown.
“With the extensive scrutiny that is now part of mortgage underwriting, I recommend that my clients have everything available to show the underwriter, short of their blood work and urinalysis,” Gulish says. Depending on state and lender requirements, count on bringing the following forms and documents to the closing:
A driver’s license or state-issued picture ID
Recent tax returns and pay stubs
W-2 forms
The two most recent monthly bank statements of all your financial accounts
Proof of additional income (alimony, Social Security, rental income, etc.)
The purchase and sale agreement and any addenda
A cashier’s check or other “good funds” check for the balance due (the total of which you’ll be notified a day or two prior to closing).
At closing, you’ll be represented by a closer for the lender who will ask you to sign a set of standard federally regulated documents, which you should receive three business days prior to your scheduled closing to review with your attorney.
You’ll also receive a settlement statement showing details of all charges for completing the purchase. Items like property address, loan and payment amounts, dates and names will need to be reviewed carefully. Plan for a long sit-down; most closings last approximately one hour or longer.
“Be prepared to explain any major debits, credit inquiries and financial changes that are reflected in bank accounts,” Gulish says. “It’s also critical that buyers don’t have a career change or major financial debits incurred during the closing process, as their lender may not approve their loan if their financial situation changes.”
The cost of closing
So, what’s included in the closing costs? They usually include:
A buyer’s home inspection report ($250 to $400)
Appraisal (up to $500)
Homeowner’s transfer and doc fees ($400 to $700, if applicable)
Prorated taxes
Insurance and mortgage interest (which can vary widely depending on purchase price)
Escrow (varies by state)
Title insurance (approximately $500)
Attorney fee
Mortgage origination fees, possibly (1 percent of purchase price).
Sellers often pay the agent commissions, netted from the seller’s proceeds, although the closing agent fee is part of the buyer’s total settlement charges. All funds you are required to provide are placed in an escrow account and disbursed to the appropriate parties by the closing agent. Closing costs and prepaid items like escrow accounts for insurance and taxes typically equate to 1 to 2 percent of the purchase price.
While you may not be obligated to have an attorney for the closing, depending on your state, it’s recommended to hire an attorney (expect a fee of a couple hundred dollars) to walk you through the paperwork before signing your signature.
“While most of the paperwork [at closing] is boilerplate documents, it is very important for the buyer’s attorney to make certain all of the terms were previously disclosed to the buyer and were agreed to in advance,” says Scott J. Clifford, an attorney with Epstein, Lipsey and Clifford in Hanover, Mass.
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