Reduce Stress As Your Closing Date Nears
Buying a home is exciting.
It can be stressful at times, too. One reason is the series of real estate contract deadlines.
Missing your closing date, the day on which the property should legally change hands, can have a big impact on your buying plans.
Fortunately there are time-tested practices that, if employed, can help you meet your agreed-upon day of closing. That keeps all parties happy, and ensures you retain the original terms of your home purchase and mortgage.
All buyers, but first-time home buyers especially, should make sure they have knowledgeable real estate and mortgage professionals on their side. Proactive representatives can make a world of difference.
And, so can a proactive buyer. Follow these guidelines, and you are likely to close on time, or even before.Verify your new rate (Apr 19th, 2019)
What Are Risks Of Missing A Closing Date?
Missed closings are fairly common, and they are not the end of the world.
The National Association of REALTORS® says that 30 percent of real estate closings are delayed, and another six percent terminate without closing. You can be among the sixty-four percent of buyers who closes on time by proactively managing your closing.
But what if you miss your closing due to circumstances outside your control? In some instances, the following results are possible.
- Forfeiture of earnest money
- Losing the house to a back-up buyer
- Incurring a fee for each day past the closing date
- Dealing with logistical problems when moving
- Having to find temporary housing
Most buyers worry about losing their earnest money and the home itself, if they miss closing.
Thankfully, it’s extremely rare that a buyer must forfeit earnest money due to a missed closing date. If you walk away from the sale for no reason, or can’t close at all, then it’s a bigger possibility..
But, most home sellers are reasonable. They would rather keep the process moving with the current buyer than start the process over entirely. That typically means the earnest money — and the home itself — are safe.Verify your new rate (Apr 19th, 2019)
Mortgage Pre-Approval: Don’t Shop Without It
The single most important thing you can do to stick to your closing date is to obtain a mortgage pre-approval.
Don’t settle for pre-qualification and call it good. That’s simply the lender’s best guess at your approval status based on a phone or in-person conversation.
A pre-approval, however, involves an application and credit check, plus an underwriter review of your income, assets and downpayment. It’s a complete approval, minus the property.
If your loan is underwritten with software, as most are, you’ll get a preliminary approval with some “conditions.” These are stipulations you have to meet to be fully approved.
When you apply for mortgage pre-approval, submit every condition your lender asks for. Answer every question, even ones that seem downright nosy.
Waiting until you’re near your closing date to provide required documents means a too-ample opportunity for glitches.Verify your new rate (Apr 19th, 2019)
Finalize Your Mortgage, Then Leave It Alone
Once you have mortgage pre-approval, you should be able to close on your loan as long as the property meets the lender’s guidelines.
It should appraise for at least the sales price, have a clear and insurable title, and there should be no health, safety, or marketability issues. Basically, it’s a home that’s livable and comfortable.
After the appraisal and required inspections and tests have been reviewed and accepted, you should be issued a final approval.
Be cautions. Don’t do something to jeopardize your approval. The following is a partial list of things to avoid.
- Moving large sums of money between accounts
- Quitting your job
- Altering the source of your downpayment
- Applying for credit or making large purchases on credit
- Changing your loan amount or mortgage program
- Missing payments on other credit accounts
If your loan process will take more than 30 days, keep a file with updated income and asset documentation in it.
Every time you get paid, drop a copy of your pay stub in the file. Ditto with your bank and investment account statements.
Forward these to your lender 30 days before closing. If your lender asks you for anything, get it as soon as possible — even if your closing is weeks away.Verify your new rate (Apr 19th, 2019)
Leave Room For Waiting Periods
New mortgage law can extend real estate closing times.
New disclosures are meant to inform and empower the buyer. While they accomplish that goal, they also come with review waiting periods that can slow down a closing.
For instance, your final set of costs as detailed on the Loan Estimate must be delivered at least seven business days before you’re allowed to complete your purchase.
In addition, another form called the Closing Disclosure must be issued three business days before closing.
If there are certain changes to the loan after that — an APR change by more than .125 percent, loan product alterations, or the addition of a pre-payment penalty, among other changes — you get a new set of disclosures and start over on your three-day waiting period.
Make sure your loan has reached its final terms more than a week before your scheduled closing date.
Set Realistic Expectations
If possible, write an offer with a closing date more than 30-days out.
If you’re pre-approved for your financing, you can probably make a 30-day closing. But your loan officer has little control over the appraiser’s backlog, the underwriter’s workload, or other potential slow-downs.
According to mortgage analysts at Ellie Mae, the average mortgage in July 2016 took 46 days to close.Verify your new rate (Apr 19th, 2019)
Write In Buyer-Friendly Contract Language
You may see an interesting phrase written into your real estate purchase contract: “time is of the essence.” That stock phrase actually means that sellers are in control if the buyer misses deadlines.
Real estate purchase agreements can be written to provide breathing room to the buyer, and you want all the breathing room you can get. Here are several desirable clauses to look for:
- Automatic extension if needed
- Refundable earnest money
- Liquidated damages (limits penalties for a missed closing)
If you don’t have an automatic extension, and you have reason to believe that you’ll miss a deadline, your agent should draft an extension right away and get the seller to sign it, giving you more time to complete your obligations.
Most people do get their home purchases closed on time. By working as a team, you, your real estate agent, and your lender can make it happen.
What Are Today’s Rates?
Mortgage rates are near three-year lows, and it’s an ideal time to be shopping for a home.
Get a quote now for your home purchase. No social security number is required to start, and there’s never any obligation to continue if you are not completely happy with your rate.Verify your new rate (Apr 19th, 2019)