Closing on a house comes with a lot of paperwork. You and all relevant parties will sit down and sign approximately 100 pages about your new purchase. Expect this to take about an hour. The lender wants to ensure that everyone is on the same page (literally!) with how you plan to pay for your new home. They recheck everything to verify that your life and circumstances haven’t changed drastically from when you were first approved for the loan. Primarily, that you are still employed, with the same credit score, and the same savings in your accounts to complete the 30-year transaction. You will need to sign, date, and initial at every instance. Bring a photo ID and know how to initiate a wire transfer with your banking institution. (As a general rule of thumb, going under contract for a home, is not the time to make other big life changes, like career, new large purchases like a car, or getting a sudden influx in cash from your great Aunt. All of these instances could halt or end your contract.)
The lender then provides a detailed outline of exactly what this decision looks like for all parties involved, much like a receipt—who paid what, when. On the day of closing, the most important number for you is “Cash Needed at Settlement”. This is the exact amount of money—down to the penny—that you need to provide to gain entrance and ownership over your new home.
What details are on this receipt?
Think of “Cash Needed at Settlement” as your out the door cost; you’ll end up paying more, but that is your grand total for the day. All other items are laid out for you to review as well, but none of them should come as a real surprise. Firstly, because you will have gotten a Closing disclosure a few days before your actual closing appointment. But additionally, most of the remaining details were agreed to in the terms of your purchase contract and negotiated with the seller or builder. The biggest one is your purchase price, how much you bid (or built) your new home for. The closing “receipt” also include Title insurance, Escrow, Recording Fees, Discounts, Prepaid Home owners insurance, inspection fees, any points being applied, and anything else that pertains to the money paid, or to be paid for this property. Taxes and specific fees related to the loan process are the biggest question mark until day-of, but are typically well estimated in your disclosures.
Sometimes the most confusing estimates at closing is Escrow, which are upfront costs paid into an account as insurance for the lender. Occasionally, the escrow account will be too high or too low resulting in a refund check issued to you after a year of occupancy, or a notice of an increase in your monthly payment to help buoy the premature depletion.
What to look out for?
Closing is a dot your I’s and cross your T’s kind of situation; the details matter. Ensure you’re looking for who is responsible for what costs: these are dictated by the negotiations you went through before going under contract for the property. If the seller was paying for the home inspection, but it’s under your column of responsibility, speak up! This is not a time to say you’ve read the terms and conditions when you haven’t. If at any time you have a question or don’t understand where the total came from—ask! Chances are you’ll get a good explanation and feel more at ease, and occasionally you may have caught something that needs clarification. The underwriter may need to reprint a page and have everyone sign (or resign) it, so don’t get too ink-happy. Take your time, read thoroughly, and focus on the task at hand.
If you leave the closing appointment and have terrible buyers remorse, you have 3 days to invoke your “Right of Rescission”. This means you can essentially dissolve the loan and paperwork you signed, and avoid taking out the debt necessary to purchase the house. These don’t happen often, nor do they come without a cost, but it is an option.