There is nothing more rewarding than making your dream home come true. Chances are, you’ve long wanted to purchase and own a house. But once you have the financial stability and mortgage pre-approval, you can go ahead and take the plunge.
Know, however, that the real estate process isn’t a walk in the park. There are several steps to take, from seeking financing to searching for a property to closing the deal. In most cases, you need to hire a realtor to assist you every step of the way.
Of all phases, the real estate closing is the most crucial part. It is the final step for executing and completing the real estate transaction. It entails the passing of a property from the seller to the buyer. Hence, there are many considerations to make, legal actions to take, and paperwork to sign.
Here are crucial factors to consider when closing a deal for a real estate property:
1. Mortgage Pre-approval
Not everyone can afford to buy a house. Even those with financial means need the help of a lender to finance their home purchase. That’s when mortgages come into the picture. A house loan is what it sounds like—borrowing money from a bank to buy a house. From there, you’ll make payments to the bank regularly until you pay off the loan. So before you begin looking for a property, get a mortgage pre-approval first. As prospective sellers see your financial backup, your whole home-buying journey will be a lot faster and more efficient.
2. Home Inspection
Before you can even arrive at the closing, you must have already performed a home inspection. In most cases, you’ll check property listings, have property viewings, and extend an offer to a potential home-seller. From there, you’ll agree to schedule the inspection of your target property. A home inspection is a thorough examination of the overall condition of a real estate property. A third-party home inspector will check the house and submit an unbiased report. Ultimately, this report will make or break the deal.
3. Title Search and Insurance
Once a home inspection gets done, you negotiate with the home-seller and come up with a decision. With a consensus between both parties, you can now start the real estate closing process. When it comes to this, pay particular attention to the title search and title insurance. The former entails checking public records to determine legal property ownership. The latter is indemnity insurance that protects you and your lender should there be title defects. Ultimately, both will give you a legal safeguard for closing the deal.
4. Monthly Contractual Payment (MCP)
Before closing, it’s vital to review your monthly contractual payment (MCP) with your lender. It’s the amount you’ll be paying your bank for borrowing money for your home purchase. MCP usually consists of your principal, interest, and an escrow account if applicable. Once you close the deal with the home seller and your lender will finance the property, there’s no turning back. The MCP is what you’ll be paying your bank during the loan term until you pay off your debt.
5. Escrow Account (Tax and Insurance)
An escrow is usually a part of a mortgage. Most home loans include an escrow account used to pay for property taxes and homeowner’s insurance. You typically pay a certain amount of money in your MCP for your taxes and insurance. Your lender then disburses the money to the tax authorities and insurance companies during the scheduled payments. But during the home-buying process, a third party holds the escrow account on behalf of the buyer and seller. Hence, be wary of choosing a neutral third party to avoid financial irregularity.
6. Interest Rate
The interest can be highly critical in the real estate process. It is the extra charge you’ll pay for the services offered during the closing. It is also what you’ll pay your lender for borrowing money. Apparently, interest rates can be volatile as they are subject to change. It’s best to lock in your interest rate. That way, you know what to expect and how much to pay. Any interest change can get you caught off guard and compromise the closing.
7. Closing Costs
It’s crucial to understand that real estate closing comes with several fees and expenses. All services offered and entities involved require money, from opening an escrow to getting legal advice to requesting documents. Consider junk fees like administrative, appraisal review, processing, and settlement fees. All these add up to the overall closing cost. Hence, you must be financially prepared and ready.
8. Legal Closing Documents
The last on the list is the paperwork, all the closing documents needed to be agreed upon and legally signed. It’s essential to review and understand all these documents before agreeing and signing them. Hence, it’s best to work with your realtor and attorney to ensure a successful closing within the bounds of the law.
At this point, you now know how to close a deal for a real estate property. Consider the crucial factors outlined above, from mortgage pre-approval to escrow account to legal documents. It’s best to hire a real estate agent who can guide you in your home-buying journey. But as far as closing is concerned, work with an attorney to ensure full legal compliance and your property’s legitimacy. Ultimately, you’ll end up making your dream home come true!
