You’ve gotten through the hard part of getting a mortgage. Your application is approved. Now, you are just waiting for that final step – the closing.
This is when the money exchanges hands, you sign paperwork, and then you become the owner of the property.
But before that happens, experts say there are some things to do and not to do to prepare for that closing so nothing goes awry.
“A mortgage is a complicated situation with a lot of moving parts. And with the industry’s guideline changes, I think there is a lot more documentation that I think is excessive – to almost the point of asking for people’s DNA,” says Patti Handy, mortgage advisor at American Family Funding in Santa Clarita, Calif. “So by the time you get to the closing, it should be anti-climactic, and you should be just signing a lot of papers.”
But there are things that you shouldn’t do. And there are things you need to do before your closing to make it go smoothly and on time, she says. She has witnessed people actually blow it and lose the house of their dreams because they messed up at the last minute.
What not to do before a closing:
Don’t purchase anything or sign up for new credit — So many people figure they have the house now, so they decide to go out and purchase new furniture or a refrigerator. They start using the reserved cash they had saved for the down payment or closing. Or worse, yet, they go sign up for a new store credit card to get what they want. Your lender will find out, and that could jeopardize getting your house.
“If there is additional credit that wasn’t listed when you applied, it will change the debt-to-income ratio and could delay the closing, or worst of all, you could lose the house completely,” Handy says. “And lenders do check your credit and your employment a few days before closing.”
Don’t move money around in your accounts – The bank statements have to match up with what you said originally on your loan application. If you have several accounts and several different banks where your money will be coming from, you need to show that on the application. It’s OK to move the money to one account a few weeks before the closing to allow you to pay your closing costs. Just make sure these were the accounts you mentioned.
Don’t change jobs or neglect to inform your lender that you were fired or laid off – “To have a job change even in the same profession and same industry will delay the closing. We have to verify income,” she says.
One of her clients got laid off with no fault of his own. But it happened before the closing, and he didn’t tell Handy. During that last minute verification of employment, her underwriter calls his workplace. They said, “Sorry, he doesn’t work here anymore.” That information came back to her.
“In this situation, his wife had enough income to save the deal. But if she didn’t, it would have fallen through,” she says.
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What to do before a closing:
Read through the HUD-1 Settlement Statement – This document shows the finalized list of fees you will be paying at your closing and will arrive a few days before your closing date. There shouldn’t be any surprises on the list.
Get a cashier’s check ready – Get all your money ready to be paid at closing. The right amount will be on the HUD-1 Settlement Statement.
Buy homeowner’s insurance — Bring your insurance policy and receipt to the closing. Mortgage lenders require you to have insurance in case something happens to the house.
Schedule final walk through inspection – Make sure you have the right to come into the house at least 24 hours before the closing to go check out if all of the repairs that were promised were actually done and to make sure everything is in working order. If the homeowners promised to leave behind all those stainless steel appliances but none of them are there anymore, you can delay the closing until you remedy the situation.
When the closing finally arrives, your mortgage lender you worked with will be there, and sometimes they won’t, Handy says.
“It depends on where you live on who is at the closing. In California, we have escrow companies, and the escrow officer is typically a notary public” who can witness and notarize each document’s signature, she says.
In other states, real estate attorneys are involved: the buyer; the seller, the escrow or closing agent, a title company representative, the mortgage lender and possibly the real estate agents.
“Basically, you need to have your I.D. and cashier’s check with you,” she says. “At the end, there should be no questions. So that means you need to work with someone that is very reachable, responsive and willing to explain everything in detail about the process. A loan officer should tell you what’s happening and keep you informed.”