Like toilet paper at the start of the pandemic, homes are flying off the shelves all across the country. Existing home sales hit 6.1 million last year, which was the highest level since 2006. Believe it or not, we’re on track to beat that in 2022!
If you’re buying or selling a home, preparing for closing can be stressful, especially if this is your first time. Fortunately, all you need is a checklist to make it easier to prepare. Here’s a comprehensive home closing checklist to help you reach a smooth and successful closing!
The Ultimate Pre-Closing Checklist
Before we get started, what is a closing checklist, and why is it important?
Well, there are two types of closing checklists for both sellers and buyers, and we’re going to discuss both of them. The first includes everything you need to do before closing. This is the essential checklist for closing on a house!
1. Finalize Contingencies
As a seller, you may have several contingencies hanging over your head before closing. Finalizing these should be your top priority. As a buyer, you should verify that these contingencies have been finalized ahead of closing.
For any home inspection contingencies, buyers may back out of a sale or request that something is fixed before closing. If that’s the case, it is the seller’s responsibility to handle these issues ahead of time.
With an appraisal contingency, buyers may hire a third party to evaluate the fair market value of the home. If the appraised value is less than the sale price, this contingency allows buyers to back out of the sale without forfeiting any applicable deposits. If you haven’t had an appraisal yet, find your home value today to get ahead!
There are also financial contingencies. These give buyers the right to back out if their mortgage approval falls through. Buyers will have a specified period (stated in the sales contract) when you have to obtain a loan that will cover the cost of the home.
If any of these contingencies apply to your sale or purchase, finalizing them ahead of closing is essential. Otherwise, the closing could be delayed or canceled altogether, leading your sale or purchase to fall through. If you have a desired sale/purchase timeline, this could easily ruin it.
2. Clear the Title
When you buy a home, you “take title” to the property, establishing legal ownership. This is a process confirmed by public land records in your town. Your mortgage lender will require a title search to ensure the title is clear. In most cases, you’ll need to purchase title insurance to protect you from legal claims to the house.
The reason for clearing the title is that distant relatives, an ex, or another family member can later claim that they actually own the home and the seller had no right to sell it. Clearing the title will ensure that this doesn’t happen, which will directly save you money and potential future headaches!
Homebuyers are entitled to choose a title company to handle this process. They can get recommendations from their real estate agents, mortgage lenders, or friends. Before making any commitments, ensure that you review the reputation and licensure of each company online.
3. Review Your Documents
Always read and review closing disclosures, contracts, and other documentation before closing. Even if your real estate agent gave you all of the information you need, it doesn’t hurt to look through everything once more before making your final moves.
4. Get Homeowner’s Insurance
You’re going to need homeowner’s insurance anyway, and your lender will likely require it for final approval. Get on top of this as soon as possible, along with any other insurance policies you may need. These may include title insurance, mortgage insurance, and others.
This could cause unnecessary delays in the closing process, so shop for the policies that fit your needs and open them as soon as possible.
5. Conduct a Final Walkthrough
Your final walkthrough should take place around 24 hours before your closing. Investigate your new home and ensure that everything is as stated and that nothing has changed since you last viewed it. If there were contingencies on the status of the home, use this time to verify that your concerns have been addressed.
This is also a good time to ensure that the sellers have officially vacated the premises, have not left any messes behind, and that you will be ready to move in after closing.
Remember, neglecting any of these can cause a sale to fall through, which is more common than you may think. 3.9% of sale contracts, which is about 1 in 20, fall through before closing!
6. Get the Final Mortgage Approved
By this point, you’ve probably been pre-approved for a loan. Now, it’s time to finalize that approval with the underwriting process.
Underwriters are like mortgage investigators. Their job is to verify all of your claims on your application and ensure that you’ve represented yourself and your family truthfully. This will likely involve a credit check, home appraisal, and verification of your financial portfolio.
This process typically happens right before closing. Try to avoid anything that will harm your credit score in the short term around this time, including opening new accounts. Hard inquiries won’t last for long on your credit score, but they could temporarily harm it, which could be devastating timing right before underwriting!
7. Prepare For Closing Costs
If you’re a first-time homebuyer, you may not know all of the closing costs that come with closing on a home. It’s best to prepare for these in advance, especially after the down payment. Common closing costs include:
- Title or attorney fees
- Pre-paid property taxes
- Mortgage insurance
- Lender fees
- Property-related fees
Typically, these costs add up to around 2% to 5% of the home’s value. Having these costs prepared in advance will ensure that you won’t meet any unexpected financial trouble. You can use a closing cost calculator for a better idea but always aim to save on the higher side, just in case.
8. Consult With Your Agent
Your real estate agent is your primary resource for your decision to purchase or sell your home. After finishing this checklist, consult with them before closing and ensure that you are getting a good deal. Feel free to ask questions or voice your concerns about the sale/purchase and ask for their professional opinion.
If you have any qualms, your agent should understand and respect that. They’re there to help you get the best deal possible, so keep shopping around.
However, not all of us want to go through an agent and spend thousands of extra dollars. If you want to sell your home fast and get a cash offer with a fair appraisal, learn how to close fast!
Day-Of Closing Checklist
As the closing date closes in, there are items you’ll need to bring with you. If you don’t have them, it could delay the closing process. Here’s your final closing on a house checklist!
Your lender will need to make copies of your photo ID to open your mortgage loan. If you have a cosigner, like a spouse, they will also need to bring their photo IDs.
Sellers and buyers will need to pay a cashier’s check in the amount specified by their lenders. This is known as your “cash to close,” which is the total amount needed to close (or open) your mortgage loan.
Proof of Insurance
For buyers, you will need proof of insurance to open your mortgage loan. Most lenders will need to verify your insurance, credit score, and other aspects before opening your loan officially, even if you were pre-approved.
Bring a copy of your contract with the seller, the home inspection report, and any additional paperwork requested by the lender. Feel free to contact your lender ahead of time and ask if they need anything specific, and try to keep everything in one place to ensure you don’t forget anything!
Use This Closing Check List Wisely
Now that you have your definitive house closing checklist, you can have a smooth transition into your next chapter in life. Closing on a house is a big deal, especially for the first time! Yes, there is a lot to do, but it doesn’t have to be stressful if you know what you’re doing.