Don’t Make These 4 Mistakes While Closing On A Home
September 6, 2021
Congratulations! Buying a home is a great achievement and closing on a home is an even greater achievement.
Although, before you start celebrating there are still a few hurdles that might get in your way. Not understanding how to avoid these hurdles could make or break your deal on the house.
In this post, we will talk about the common mistakes to avoid and some important things to consider before closing on a house. But first, let’s take a look at what happens at the closing on a house.
What Happens At The Closing Of A House?
Closing is the day you officially receive ownership of the house by transferring the funds to the seller’s account. Once the seller has accepted your offer and both the parties have reached agreeable terms, the date of closing is set.
The closing generally takes place at the Registry of Deeds office, however, you can choose to carry out the closing process at your real estate agent’s office as well.
You will have to sign several documents to complete the closing process. The list of documents includes:
- An agreement to pay the mortgage to the lender
- A mortgage document stating that they’ll keep your home as collateral against repayment of the loan
- A disclosure document with the closing costs, which typically includes loan origination, credit checks, title search, and the home appraisal costs
- Settlement statements
- Tax records
Now that you have the basic idea of what happens at closing, let’s take a look at the common mistakes you need to avoid during the process.
Mistakes To Avoid When Closing On A House
1. Not reading contracts thoroughly
Once signed, a contract is legally enforceable. You can do nothing about it.
We live in the digital age where average attention spans are smaller than that of a goldfish. Your brain probably isn’t used to reading long documents, but you’ll want to read any contract you sign thoroughly when buying a home.
Considering the fact that it is one of the most important decisions of your life, it becomes imperative for you to read through contracts carefully and thoroughly. You don’t want to miss the critical details in the contract and end up regretting it later.
Try to get a copy of as much paperwork as possible before closing on the home and read it a few days in advance. This will give you time to make notes and ask questions, if you have any questions, on the day of the closing, don’t hesitate to ask for a copy of everything.
There will be some documents, like the lender’s documents or the deed of trust, which are only available at closing. Don’t rush through them. Take your time to read, even if it means that others have to wait.
2. Using inconsistent names in documents
No nicknames allowed.
This is the most important, unwritten rule you need to follow when carrying out real estate transactions. It is quite common for people to get into trouble simply because they had a name mismatch at the time of closing.
This is the reason that you need to always share your full legal name with the lender, your real estate agent, and the title officer when carrying out the deal.
At the closing, you will be required to produce a government ID. If your name on the ID doesn’t match your paperwork, you will have to either get a new ID or redo the paperwork.
In either case, you will not be able to close your house on that day. Always using your full name for paperwork, as written on your government ID, avoids any confusion or last-minute chaos.
3. Having no clue about the closing process
From reading lender’s documents to signing a whole bunch of paperwork – home buyers need to be mentally prepared to go through all of this on the day of closing.
It’s common for first-time home buyers to have no clue about what happens when closing on a house. As a result, many of them get cold feet during closing which creates a chaotic situation.
Every buyer and seller of a house should understand the closing process to make it go as smoothly as possible.
You need to know the location the closing will take place, which is a location you and the lender mutually decide on. You also need to bring a government-issued ID with the same name written on your paperwork.
It’s also a great idea to contact the closing agent to see if they have any specific instructions for you to follow on closing day.
4. Not preparing for the closing costs
Appraisal fees. Property Taxes. Home Insurances. Legal fees.
All these contribute to the costs you will need to pay on the day of closing. Make sure you consider all of these costs and come fully prepared with an arrangement to pay the amount.
One of the most important things to remember when it comes to closing costs is that you cannot use a personal check to cover them. You will need a cashier’s check or a wire transfer.
However, many closing agents don’t even accept cashier checks for large amounts since it means the funds won’t be available in an escrow account until at least the next business day. You can always ask the closing agent about this before the day of closing and make the necessary arrangements.
Summing it up
Closing is the most important part of the home buying process. This is when all of the hard work that you and your real estate agent have put in will finally pay off. But, the deal could still fall through for a myriad of reasons. Avoiding these mistakes will better help you prepare and get through closing day successfully.
All the best.
If you want to learn more about how to prepare for closing day and what to do after closing on a home, then check out our list of the 4 things you need to do before closing on a house and after.