What Happens on Closing Day When Buying Your House?
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by Richard Morrison
- January 29, 2020
- Buying
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Closing Day: From Contract To Keys
Buying a house is an exciting milestone, but the closing day can intimidate even seasoned homeowners. Did you know that it’s not just about signing papers but involves a series of crucial steps like arranging funds and completing inspections? This blog will navigate you through every element of the home buying process, ensuring you are well-prepared for your big day.
Ready to master your closing day with ease? Let’s dive in!
Key Takeaways
- Closing day, also known as completion day, is when all the paperwork is signed and property ownership is transferred from the seller to the buyer.
- Preparing for closing day involves ensuring your down payment funds are ready, reviewing the contract once more, completing a final walk-through of the property, and arranging home insurance.
- On closing day, key steps include opening an escrow account to protect funds, conducting a title search and obtaining title insurance to ensure clear ownership rights, hiring an attorney to navigate legal requirements and negotiate closing costs, completing a home inspection to assess the property’s condition, getting a pest inspection to identify any potential issues with pests or damage, locking in your interest rate to secure favorable loan terms, removing contingencies specified in the purchase agreement to move forward with closing.
Read More:
- Understanding the Possession Date for Homebuyers
- Closing Date and Possession Date Canada
- What are the Closing Costs of Buying a Home in BC?
- Closing Checklist Real Estate
- Can I Back Out of Buying a House After an Inspection?
- What You Need to Know Before Making an Offer on a Home in Canada
Understanding Closing Day
Closing day, often referred to as completion day, marks a significant milestone in the home buying process. It’s when all the paperwork is signed and sealed, transferring property ownership from seller to buyer.
A monumental occasion for both parties involved — it signifies the end of one homeowner’s journey and simultaneously ushers in a fresh start for another.
In most cases, your realtor will coordinate with the lawyer or notary to ensure everything progresses smoothly during this phase. Once documents related to mortgage loan and purchase are duly signed by you – the buyer – it’s time to take care of financial obligations.
This includes presenting a bank draft equivalent to the remaining funds enumerated by your legal counsel.
The next step puts into motion arrangements at an official level; where your attorney or notary files relevant papers with Land Title Office confirming you as new owner on record. Consequently marking an end of closing process after seller settles their dues including existing mortgage balance along with incidental costs.
Preparations for Closing Day
To prepare for closing day, make sure your down payment funds are ready, review the contract once more, complete a final walk-through to ensure everything is in order, and arrange home insurance.
Ensure Down Payment Funds are Ready When Buying A Home
Securing the needed funds for your down payment well in advance is a crucial step in buying a house. This upfront cost, typically expressed as a percentage of the total purchase price, can greatly influence your mortgage loan terms and monthly payments.
Despite being an intimidating prospect for many first-time buyers, having your down payment ready expedites the entire house buying process. By effectively managing this financial responsibility early on, you’ll be better prepared to navigate property transfer, real estate market fluctuations and potential hidden costs associated with owning residential or investment property.
As part of your preparations for closing day – ensure those down payment funds are ready.
Review Contract Once More
As a prospective home buyer, you’re heading into the final stretch of the property purchase process by the time closing day approaches. Before this pivotal event, it’s essential to take a meticulous look at your contract once more and have all documents prepared.
This isn’t just paper-pushing—checking and double-checking before final closing can help ensure all agreed-upon terms are clear and any included items are properly accounted for. Maybe there’s an old chandelier that was supposed to stay with the house or perhaps there is specific language about repairs after your home inspection.
Complete Final Walk Through The House Before Closing
During the home buying process, one important step to take before closing day is to complete a final walk-through of the property. This involves inspecting the condition of the house and ensuring that all promised items are in place.
It’s recommended to schedule this walk-through a few days before closing to allow time for any necessary repairs or negotiations with the seller. By carefully reviewing the purchase contract and bringing along a checklist, buyers can ensure that everything agreed upon during negotiations is accounted for during this crucial inspection.
If any issues or discrepancies are found, or any other items that may be required, it’s important to address them with the seller before proceeding with the closing. The final walk-through serves as an opportunity for buyers to verify that their future home is in satisfactory condition before officially taking ownership.
Arrange Home Insurance
Home insurance is a crucial step in the house buying process. You want to ensure that you have have sufficient financial protection and peace of mind against unexpected events like fire, theft, or natural disasters. In advance of closing, it’s important to arrange for home insurance coverage on the property.
This ensures that your investment is safeguarded from any potential damages or liabilities. By having your policy in place before closing, you can streamline the process and ensure a smooth transition into homeownership.
So don’t forget to take care of this important detail as you prepare for closing day.
Key Steps on Closing Day
On closing day, you will need to open an escrow account, conduct a title search and secure title insurance. You should also hire an attorney to negotiate closing costs and ensure all legal requirements are met.
Complete a home inspection and pest inspection, lock in your interest rate, remove contingencies, meet funding requirements, and do a final walk-through before understanding the paperwork involved in the process.
Open an Escrow Account
Opening an escrow account is a crucial step on closing day when buying a house. This account acts as a neutral third-party holding the funds involved in the transaction, ensuring that both the buyer and seller are protected.
The buyer deposits their down payment and other necessary funds into the escrow account, which will be released to the appropriate parties once all conditions of the sale have been met. This includes verifying that any repairs or upgrades agreed upon during negotiations have been completed satisfactorily.
By opening an escrow account, buyers can have peace of mind knowing that funds have been received and their money is secure until ownership of the property is officially transferred to them.
Title Search and Insurance
To ensure a smooth and secure home buying transaction, it is crucial to conduct a thorough title search and obtain insurance. A title search involves researching the ownership history of the property to uncover any legal issues or claims that could potentially impact the sale.
This step provides peace of mind by confirming that the seller has clear and undisputed ownership rights. Additionally, obtaining title insurance is essential as it protects both the buyer and lender from future claims or losses related to the property.
By addressing potential risks upfront through these measures, buyers can proceed with confidence on closing day knowing they have taken necessary steps to safeguard their investment.
Hire an Attorney
Hiring an attorney is a crucial step on closing day when buying a house. An attorney specializes in real estate law and can provide valuable guidance throughout the closing process. They will review all legal documents to ensure your interests are protected, including the purchase agreement, title search, and insurance policies.
Additionally, they can help negotiate any disputes or issues that may arise during closing and address any legal concerns you may have. By hiring an attorney, you can have peace of mind knowing that you have a professional advocate who will ensure a smooth and legally sound transaction.
Negotiate Closing Costs
Buyers should be proactive in negotiating their closing costs to save money on the overall purchase of their new home. Closing costs can include fees for things like loan origination, appraisal, title search, and insurance.
By understanding all of the potential costs involved upfront and comparing estimates from different lenders or service providers, buyers can potentially reduce these expenses. It’s important to note that while some closing costs are fixed, others may be negotiable or even waived entirely.
Taking time to review and discuss these fees with relevant professionals before closing day can help ensure a smoother transaction and potentially significant savings in the long run.
Complete Home Inspection
Before closing on your new house, it is crucial to schedule a complete home inspection. This inspection provides you with an opportunity to assess the condition of the property and identify any potential issues that may need attention.
A professional inspector will thoroughly examine the structure, electrical systems, plumbing, HVAC system, and other key components of the home to ensure everything is in proper working order.
By conducting a comprehensive home inspection, you can make informed decisions about necessary repairs or negotiate with the seller for any needed adjustments before finalizing the purchase.
Get a Pest Inspection
One crucial step to take on closing day when buying a house is getting a pest inspection. This is essential because it allows you to identify any potential pest-related issues in the property before finalizing the purchase.
Pest inspections can uncover hidden problems such as termite infestations or rodent damage that could cause significant and costly damage to the house down the line. By conducting a thorough pest inspection, you can ensure that you are making an informed decision about the condition of the property and avoid any unpleasant surprises after moving in.
Lock in Your Interest Rate
Locking in your interest rate is a crucial step on closing day when buying a house. By doing this, you secure the rate at which you will be borrowing money from your lender for the entire duration of your mortgage loan.
This is important because interest rates can fluctuate, and if they go up, it could significantly impact your monthly mortgage payments and overall affordability of the home. By locking in your interest rate, you can protect yourself from any potential increases and ensure that you are getting the best possible terms for your loan.
It’s essential to work closely with your mortgage provider to understand all the details and implications of locking in an interest rate before finalizing the deal.
Remove Contingencies
To move forward with closing on a house, it is crucial to remove any contingencies that were included in the purchase agreement. Contingencies are conditions that need to be met before the sale can be finalized.
This may involve things like obtaining financing approval from your lender, completing a satisfactory home inspection, or resolving any issues discovered during the inspection process. Removing contingencies demonstrates your commitment to purchasing the property and signals to the seller that you are ready to proceed with closing.
It’s important to address these contingencies promptly so that there are no delays in finalizing the purchase of your new home.
Meet Funding Requirements
To successfully close on a house, it is crucial for the buyer to meet all the funding requirements. This includes ensuring that all necessary funds are available and ready to be transferred.
Buyers must have their down payment funds secured and should arrange any additional financing, such as a mortgage loan, in advance. It’s important to review the purchase contract and understand the total costs involved in closing on a house, including closing costs and any potential adjustments or fees.
By meeting these funding requirements ahead of time, buyers can ensure a smooth and seamless closing process without any last-minute financial surprises.
Final Walk-Through
During the final walk-through, which is a crucial step in the closing day process when buying a house, it’s important to meticulously inspect the property to ensure everything is in proper working order.
Take your time to check that all fixtures, appliances, and systems are in good condition and functioning as expected. This is also the opportunity to confirm that any repairs or agreed-upon changes have been completed satisfactorily.
Additionally, make sure that any personal property items included in the purchase agreement are still present. If you come across any issues or discrepancies during this walk-through, address them with the seller before proceeding with the closing.
Understand the Paperwork
Understanding the paperwork involved in closing day is crucial for a smooth and successful home buying process. This step entails reviewing and signing various documents related to the mortgage loan and purchase of the home.
These documents may include the purchase agreement, statement of adjustments, property transfer tax forms, insurance policies, and more. It is important to carefully read and understand each document before signing to ensure that all agreed-upon terms and included items are accounted for.
Additionally, working with a real estate attorney or professional advisor can provide valuable guidance in navigating through the paperwork maze. By understanding the paperwork involved on closing day, buyers can protect their interests and ensure a seamless transition into homeownership.
Potential Problems to Avoid on Closing Day
Potential problems to avoid on closing day include delays in mortgage approval, unexpected costs that were not budgeted for, issues with official documents, and the possibility of homebuyer’s remorse.
It is important to be proactive and prepared to address these potential challenges to ensure a smooth closing process.
Mortgage Approval Delays
Mortgage approval delays can throw a wrench into the closing day process when buying a house. These delays can occur due to various reasons, such as insufficient documentation, credit issues, or problems with the appraisal.
It is crucial for buyers to stay proactive and ensure that their mortgage application is on track well before the closing date. By providing all necessary documents promptly and maintaining clear communication with their lender, buyers can help prevent any unnecessary hold-ups.
Additionally, it’s important to avoid scheduling the closing at the end of the month or week as this leaves little room for problem resolution should any issues arise. Being aware of potential delays and taking steps to prevent them will help smooth out the final stages of purchasing a home.
Unforeseen Costs
Closing day can bring about some unexpected costs for home buyers. While you may have accounted for the down payment and closing costs, there are additional expenses that can catch you off guard.
For example, appraisal fees, property taxes, inspection fees, and even potential damage to the property discovered during the final walkthrough can all add up quickly. It’s important to budget for these unforeseen costs and have some extra funds set aside to cover them.
By being prepared for these surprises, you can avoid any financial hiccups on closing day and ensure a smooth transition into your new home ownership journey.
Issues with Official Documents
Issues with official documents can potentially cause problems and delays in the closing process on closing day when buying a house. It is important for buyers to have a clear understanding of all the documents they need to sign and review them carefully before closing.
Notary or lawyers play a crucial role in preparing and reviewing the necessary documents, ensuring that everything is accurate and legally binding. Buyers should make sure they review the purchase contract, statement of adjustments, property transfer tax forms, and any other relevant paperwork to ensure that all agreed-upon terms and included items are accounted for.
By thoroughly examining these official documents, buyers can avoid any unexpected issues during the closing process and ensure a smooth transition into homeownership.
Homebuyer’s Remorse
Homebuyer’s remorse is a common issue that can arise on closing day when buying a house. It refers to the feelings of regret or doubt that buyers may experience after completing the purchase.
This can happen for various reasons, such as realizing that the property doesn’t meet their expectations, discovering hidden costs or problems with the house, or feeling overwhelmed by the financial commitment.
To avoid homebuyer’s remorse, it is important for buyers to thoroughly research and inspect the property before closing, review all documents and costs involved in the transaction, and seek professional advice from real estate agents or lawyers.
Frequently Asked Questions
1. What happens on closing day when buying a house?
On closing day, several important tasks are completed. The buyer completes the purchase of the property, the seller receives the payment, and the legal ownership of the property is transferred from the seller to the buyer.
2. What are the closing costs?
Closing costs include various fees and expenses associated with the home purchase. These may include legal fees, land transfer tax, title insurance, and any outstanding property taxes or utilities.
3. What is a mortgage?
A mortgage is a loan used to finance the purchase of a home. It is typically repaid over a set period of time, including both the principal amount borrowed and interest.
4. Who is involved on closing day?
On closing day, the buyer, seller, real estate agents, lawyers, and possibly a mortgage broker or lender are all involved in the transaction.
5. What is the closing date?
The closing date is the official date on which the property sale is finalized, and ownership is transferred to the buyer. It is agreed upon by both the buyer and the seller in the purchase agreement.
6. What is a purchase agreement?
A purchase agreement is a legally binding contract between the buyer and seller, outlining the terms and conditions of the property sale.
7. What is a home inspection?
A home inspection is an evaluation of the property’s condition conducted by a professional inspector. It helps identify any potential issues or damages that may affect the buyer’s decision or negotiation prior to closing.
8. What is a bank draft?
A bank draft is a secure payment method often used for large transactions, such as on closing day. It is a check drawn by the bank, guaranteeing the payment to the seller.
9. What is title insurance?
Title insurance is a form of protection for both the buyer and the lender against any potential defects in the property’s title or ownership. It provides financial coverage in case any disputed ownership claims arise after the purchase.
10. How do I get the keys to my new home?
Once the transaction is complete and ownership has been transferred, you will receive the keys to your new home. This typically happens on closing day or the completion day, as agreed upon in the purchase agreement.
Conclusion
Closing day is an exciting and important event when buying a house. It is the day when the buyer gets the keys to their new home and officially becomes the owner. There are several things that happen on closing day. Firstly, both the buyer and the seller need to be prepared for closing. This involves completing all the necessary paperwork and ensuring that any outstanding issues or conditions have been met. In British Columbia on closing day, the seller must provide the buyer with the keys to the property. The closing day in real estate is a culmination of all the hard work and effort put into searching for the ideal home. It is the day when the buyer finally receives the keys to their new home and the seller transfers ownership of the property to the buyer.
On closing day, buying a house is more than just signing documents and handing over money. It’s the culmination of months of preparation and negotiation. From arranging funds to completing final inspections, there are many crucial steps that need to be taken.
By understanding the process and working with professionals like realtors, lawyers, and lenders, you can ensure a smooth and successful closing day experience. So get ready to celebrate because soon enough, you’ll be holding the keys to your new dream home in your hands!
Sources:
https://www.investopedia.com/articles/mortgages-real-estate/10/closing-home-process.asp
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