Closing for Buyers!

After the inspection response has been approved by all parties, we will proceed to closing. In New Mexico State, closing is considered the day that funding occurs, the deed is recorded in the buyers’ names, and the proceeds are paid to the seller. When you can take legal possession of the property depends upon the terms or conditions of your contract.

Loan Application: You already should have been pre-approved and gone through underwriting. Moreover, you will need to fill out a formal loan application within five days after the purchase and sale agreement has been signed by both parties. If you change lender, some restrictions may apply. Discuss this with your lender and real estate broker and refer to your purchase agreement contract.

Appraisal: Your lender will require an appraisal. This accomplishes several things. To begin with, it is your assurance that the property is properly priced. Appraisers can also call for work orders to be performed by the seller(s) to make the property lendable especially if you have an FHA loan program. Items that had been called for work orders to be performed by the seller(s) before closing now become mandatory to sell his/her home to you.

Homeowners Insurance: You will need to secure homeowners’ insurance before closing or per the deadline required by your lender and specified in the purchase agreement contract.

Escrow: Escrow is an arrangement in which a disinterested third party holds documents and funds on behalf of a buyer and seller, and distributes them according to the contract instructions. Once all terms and conditions of the instructions of both parties have been fulfilled and all closing conditions satisfied, the escrow is closed and the safe and accurate transfer of property and money are accomplished. Escrow is there all along from the approved purchase agreement to closing.

Before closing, paperwork must be signed. The escrow company will set up an appointment with you to sign documents at a chosen place. They will give you the total amount of funds you need to bring with you to close. These funds are usually in the form of a certified, cashier’s check or deposit by wire transfer.

What “NOT” To Do Until Closing

After mutual acceptance, there is something you must know and I cannot emphasize enough the importance. DO NOT change anything in your financial situation from now on until after the closing day. You cannot buy furniture, you cannot buy a car, you cannot pay your credit cards in full UNLESS you speak with your lender and have the OK from her/him. Your financial situation at closing and few days prior when underwriters are reviewing your file must be the same way it was when you were approved, and do not change names or get married few days prior to closing. If you buy large items or you change your financial status, the underwriter/lender must re-evaluate your file and your buyer power may change. You don’t want that. If you really need to buy something, I suggest you run that by your lender and make sure it’s all OK. The following are helpful tips:

What Not to Do Before Closing on a House

1. Leaving Town Or Falling Off The Planet: Going on vacation or becoming hard to reach while in escrow is not a good idea, especially if your lender needs to get in touch with you to process your loan. Any glitches in that process can push back the closing date for your home. For the same reason, it’s not a good idea to change your cell phone number right now. It’s best that you keep in touch with all the necessary people while you are working to close on the property.

2. Changing Jobs: Changing jobs or going self-employed during this time period could certainly make a lender queasy and lead that lender to question whether you’ll be able to afford that home. Lenders prefer a steady and consistent job history. If you make a job switch just before closing on a home, it could put everything on hold while your lender re-evaluates your financial position.

3. Being A Big Spender: You’re about to get a new house, so why not whip out your credit cards and buy a new washer/dryer, dishwasher and refrigerator…or maybe, take out a loan for a new car for your new driveway? Because these big purchases and taking on more debt will throw off what’s called your “debt to income ratio” (which measures how much of your monthly income goes toward debt obligations), a ratio that lenders consider when evaluating a loan application. You don’t want to end up buying items for a home you don’t have – one that you lost because you nixed your chances of securing that mortgage before it went through. You might even run into trouble if you pay for these items with cash – lenders look at how much cash reserves you have when approving a mortgage. And don’t think you’re off the hook if you lease a car instead of purchasing one because leasing a new car at this time could jeopardize your standing with your lender as well. Instead, try to keep the balances on your credit cards low and don’t take on new debt (this includes co-signing on a loan) until after you close on your home.

4. Paying Bills Late: If you’re about to close on your home, stay current on your bills as you don’t want to wreck your credit score just before your loan goes through. Any changes to your credit status could affect the likelihood of closing on your new home, so you want to keep your credit good at least until you close on your home.

5. Opening/Closing New Credit Card Accounts: Opening up new credit cards or closing old ones just before closing on your new home could negatively affect your credit status. Again, wait until making such moves until your mortgage is secure.

6. Moving Big Amounts Of Money: Before that home is definitely yours, don’t transfer large amounts into your checking or savings accounts or check with your mortgage company before doing so. If they see large amounts of money moving around, they may wonder why and raise a red flag. (i.e.: they may think you’ve secured another loan and have more debt obligations than you did when initially applying for the loan.) Again, you don’t want to delay or hold up your closing.