As recent home buyers, you are eagerly anticipating your first night in your new home. You made an offer, it has been accepted and you can move in tomorrow, right? Not exactly. The closing process on a new home offers a lot of hurry up and waiting for the new home buyers. One study estimates that the closing process can take about 50 days. Why so long? Here are some of the things that need to happen before you can close on a new home.
Home Inspection. This part of the process requires that the home be looked at from top to bottom. Usually a home inspector will look at everything from the roof to the foundation and all parts in between. He will determine if there is water, termite or other damage to the home. He will provide a report to both parties upon completion. From this report, the buyer can determine if there are any serious structural damages that the seller would need to repair or provide a rebate so that the buyer could fix the items. You will also conduct your own walkthrough close to the time of signing.
Property Appraisal. An independent person or company completes a home appraisal to determine the estimated value of the home. To do this, they consider factors such as the size of the home, location, and comparable sales. If the home is determined to be valued at less than the agreed upon asking price, buyers may be required to provide the difference or the home buying process may be stalled while both parties renegotiate.
Mortgage Process. While many people get pre-approved for a mortgage before they go shopping for a home, many more do not and first have to get approved by the bank before a purchase can go through. This takes a significant amount of time, and paperwork, for both the buyer and the mortgage lender. Obtaining a pre-approval letter helps speed up the process but it can still take up to 30 days for a loan to be completed.
Offers Made With Contingencies. Home buyers and sellers are making offers with contingencies. Examples would be like when the seller needs to find a new home before the sale can be final or the seller would like to rent back until a certain date because their new home won't be ready yet.
Time to Get Paperwork in Order. During this time there are numerous documents that need to be retrieved and drafted like the deed to the house, title work, appraisal and property survey. The borrower must present proof of homeowners insurance, Private Mortgage Insurance if they are paying less than the required 20% down for the home and proof of mortgage. Once all the pieces are in place, the two parties can come to settlement to transfer ownership.
Things to Think About
- What you would like to do in case of large repairs or fixes? Is it more important that you get into your new home as quickly as possible or would you like everything completed and have a turn key home?
- Is your future home located in a market with ballooning costs. Don't fall victim to paying too much for too little. Think of your home as a long term investment.
- The more of the mortgage process you have behind you, the faster and smoother the process will go. Speaking with a lender early in the process can make that happen.
- Consider if an offer with contingencies works for your situation.
- Gather your paperwork and do your research before you start the home buying process so you have everything you need at your fingertips.
The closing process can be stressful and take a while. The more information you have, the better prepared you are to tackle the challenges that lie ahead.