Imagine you find your dream house to buy, but you don’t know how to make it yours. Before you send an offer letter, you should understand all of the steps to closing on a house.
And if you’re the seller, you also need to understand the process. That way, you can make sure the deal won’t fall through and that you can get the money you want.
No matter your situation, read on to learn how to close on a home.
Sign the Purchase Offer
One of the first steps to closing on a house is to accept an offer from a buyer. You’ll need to wait for offers to come in, and you can review them over time.
Sometimes, real estate agents will write the letter for the buyer, but others will write it themselves. Either way, the offer letter should include the home’s address, the buyers’ names, and how much money they’re offering.
It can also include information about contingencies, such as a good inspection. The letter might also include when the buyer wants to close on the home and when they want a response to their offer.
At that point, you’ll need to sign the offer before you move forward.
Hire a Closing Agent
Next, you should hire a closing agent or settlement agent to help you through the closing process. The agent will help the buyer and seller communicate and make the transaction of selling a house.
Closing agents usually work for the buyer, so make sure to contact the buyer to get the agent’s information. That way, you’ll be able to transfer ownership of the house smoothly and easily.
If you’re buying a home, be sure to look for an agent with experience with closing. Ask the agent if they’ve helped others buy properties similar to the one you’re buying to learn how well they can help you.
Open an Escrow Account
Next, the buyer will need to open an escrow account to hold the money throughout the buying process. The buyer should do this within a few days of the seller accepting the offer.
That way, the buyer will have a place to deposit the earnest money. Earnest money will help prove to the seller that the buyer is serious about purchasing.
If you’re selling the home, you can contact the buyer to make sure they open the account. When the money is in escrow, a third party will manage the finances to keep them safe.
Once you finish closing, the seller will be able to obtain the money.
Go Through an Inspection
Another one of the most important steps to closing on a house is to perform an inspection. When buying a home, it will be your responsibility to hire an inspector.
If you’re the seller, you should be open to an inspection to give your buyer peace of mind regarding the sale. An inspector can discover faulty wiring, foundation problems, and other issues.
The entire inspection can take a few hours because it should be as complete as possible. It can then take a few days for the inspector to write up a report on their findings.
Buyers will be responsible for hiring and paying the inspector, so you don’t need to pay anything as the seller.
Renegotiate the Offer
If the inspector finds any major problems, you may want to renegotiate the offer. The buyer might want to lower their offer if there are significant issues that need repairs.
As the seller, you have to consider how low you’ll be willing to negotiate. Then, you can sell your house the way it is now. Otherwise, you may lose an offer, and you may need to pay to repair things before you can sell the house.
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Of course, you can also inspect your house and make any repairs before you sell it. That way, you may not need to worry about renegotiating due to an inspection.
Complete a Mortgage Application
If you’re buying a home, you will need to apply for a mortgage. You will need to include details about you and your financial situation to prove that you can afford the loan.
Depending on your credit score, you may receive a good interest rate. Be sure to review the terms of the loan to make sure you’re comfortable paying it.
When you’re the seller, you may want to verify that the buyer has applied for a mortgage. Then, you can make sure the buyer will be able to buy your house.
Review the Lender Appraisal
Another essential part of the buying process is a lender appraisal. Some mortgage lenders will need to go through the home and make sure the value isn’t less than the amount the buyer is borrowing.
You may want to get your own appraisal to determine how much you can expect to make from the sale. If the house’s value is lower than the current offer, the buyer may choose to renegotiate.
Some buyers may be willing to pay the difference between the value and the sale price in cash to get the house. However, others may decide not to go through with the offer.
Process Your Closing Documents
Next up in the steps to closing on a house is to process all of the closing documents. If you’re selling your house, you will need to fill out a seller’s disclosure to inform the buyer of all of the problems you know of.
If you’re purchasing a home, you’ll need to review that disclosure as well as a closing disclosure. The closing disclosure covers the amount and term of the home loan as well as the interest rate.
Homebuyers should also review the title documents to ensure the seller is legally able to sell the home. You may also receive a copy of your mortgage application so that you can make changes to it or confirm that it’s still accurate.
Cancel or Move Your Homeowner’s Insurance
If you’re selling a house, you’ll want to cancel your homeowner’s insurance policy or move it to your new address. Purchasing homeowner’s insurance is crucial for buyers at this stage.
Some lenders may require you to have insurance before they will approve your loan. Make sure you choose a policy you can afford in addition to your mortgage payment and other bills.
If you’re selling and buying a home, you can transfer the insurance. Then, you’ll be able to keep the same coverage at your new address.
And Title Insurance
When buying a home, you may want to obtain title insurance. Your lender may not require it, but it can protect you in the future if someone else tries to file a claim on the property.
Fortunately, you only need to pay for title insurance once instead of each month. That makes it even easier to afford the coverage in case something happens in the future.
Be sure to shop around for a good title insurance company. Choose a policy with enough coverage to offer you peace of mind as you purchase and own the home but that isn’t too expensive.
Clear the Title
Sellers will need to clear title on their current property before they can sell it. This is where you make sure you don’t have any outstanding loans or claims on the house.
You can do a title search to look for any loans or claims. Issues that may keep you from selling the house include:
- Gambling debts
- Renovation projects without the correct permits
- Unpaid child support
Be sure to also check for issues with paperwork in previous sales of the home. You should also ensure you don’t owe any HOA fees or fees to contractors that you’ve hired.
If you find you haven’t paid certain things, you’ll need to take care of them before closing. Perform a title search to make finding issues easy so that you can resolve them before closing day.
Organize Your Finances
Both buyers and sellers should organize finances before closing on a home. Buyers need to prepare for a few different charges, including closing costs, lender credits, and cash to close.
Closing costs are what you’ll pay the lender, and they cover things like appraisals and your application fee. If you’re willing to pay a higher interest rate, your lender may offer lender credits to pay for some costs.
You’ll also need to obtain a cashier’s check for the amount of your downpayment. Cashier’s checks are more trustworthy than personal checks, so make sure to get the check in advance of closing day.
If you’re the seller, you may need to pay some of the buyer’s closing costs through seller concessions. You can negotiate this early in the closing process, so you’ll know if you need to pay anything or not.
Perform a Final Walkthrough
One of the last steps to closing on a house before closing day is to do a final walkthrough. You’ll do this a day or two before you close on the home, and it’s your last chance to make sure the house is still in good condition.
The walkthrough also gives you a chance to review any issues that came up in an earlier inspection. If the house has developed more issues since the prior inspection, you can take note of those problems.
During the walkthrough, check everything, including the light switches, faucets, doors, garage doors, and toilets. Be as thorough as you can to make sure you don’t miss any issues.
If you discover a problem, you can get the money to fix it. Your agent can take that money from the money the seller would earn since the house isn’t in the condition they promised.
Whether you’re selling or buying a home, you should start packing to move. While this isn’t directly part of the closing process, you should prepare for the move before closing.
That way, you’ll have less work to do after you officially transfer ownership of the property. It’s also especially important to start packing early if you have a lot of items to pack.
You may not have time to pack everything in a week before you more. The earlier you start, the more time you’ll have to organize everything and make sure your house is ready for the buyer.
Bring Essential Documents
On closing day, you’ll need to bring some essentials to make everything go smoothly. As a seller, you should bring your keys, the seller’s disclosure, seller concessions, and a form of identification.
If you’re purchasing a home, you’ll want to bring your ID and a cashier’s check for the amount of your downpayment. You should also bring your closing disclosure and other documents from earlier in the buying process.
Be sure to have a good pen on hand to sign all of the paperwork. You’ll need to sign documents like the property deed, closing statement, and the affidavit of title.
Bring anything else you think you might need so that you have it in case. Then, you will be able to proceed with closing on your home.
Transfer the Keys
One of the last steps to closing on a house is for the seller to give the keys to the buyer. After you sign all of the necessary paperwork, you can hand over the keys to confirm the sale.
Of course, as the seller, you’ll want to make sure that you’ve moved all of your belongings out of the house. If you’re the buyer, you may want to bring a small envelope to keep the keys safe after you receive them.
Then, you’ll be able to prepare for moving day, and you’ll know where your keys are.
If the house has a garage door code, you should also reset the code for the buyer. That way, they’ll be able to set a code that will work for them.
Don’t Forget the Steps to Closing on a House
Whether you’re selling or buying, you need to consider the steps to closing on a house. From obtaining an offer to transferring the keys, you need to make sure the sale goes smoothly.
Be sure to go through these steps with care whether you’re buying or selling. Then, you’ll be able to buy the home of your dreams or sell your home to downsize.
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