Buying a home can feel like running a marathon: securing financing, finding or building your dream home, having your offer accepted. Once you’ve accomplished all that, you may think that it’s time to relax. Unfortunately, before you move in there are still several steps left. Read on for a rundown of the benchmarks that need to be met prior to closing and getting your keys. *
Note that if you’re financing your purchase with a mortgage, many of these steps will be required by your lender (and may be coordinated by them as well). Even if you’re paying cash, you’ll likely still benefit from this checklist.
1. Open and fund an escrow account.
To signal your commitment to purchasing the property, you typically put down a deposit (or “earnest money”). These funds are placed in an escrow
account held by a neutral third party such as an attorney or escrow company. At closing, they’re released to the seller and applied to the down payment and closing costs. Escrow accounts are critical: they secure the transaction and help prevent both the buyer and the seller from being cheated.
2. Get an appraisal.
Most lenders will require a professional appraisal to assess the value of the property and ensure that the assessed value meets or exceeds the agreed-upon purchase price. If not, you’ll have to increase your down payment. Not only is this step critical to getting a mortgage, it also helps prevent you from overpaying.
It can take two-to-three weeks to schedule the appraiser’s visit and another week or two before they complete and return their report.
3. Complete a home inspection.
As part of the mortgage process, your lender will require that a professional inspector evaluates the property for hidden issues. (This is a smart step, even if you’re not taking out a mortgage.) As with the lender’s appraisal, it can take a few weeks to schedule an inspector’s visit and another week or two before they complete and return their report.
4. Carry out a pest inspection.
Distinct from a home inspection, this step involves hiring a specialist to check the property for infestation by wood-destroying insects like termites or carpenter ants. Even if you live in a state that doesn’t require this step, it’s a good idea to pay for this type of evaluation. Again, allot a couple of weeks to schedule the inspector’s visit and another week or so to receive their report. (Home and pest inspections can take place simultaneously, though they’re carried out by different professionals.)
5. Consider renegotiating.
If the appraisal comes back low or either inspection uncovers problems, consider renegotiating the deal. Unless your purchase agreement did not include mortgage and inspection contingencies, you can ask the seller to reduce the sales price, fix the problems, or issue you a credit for known issues.
6. Negotiate closing costs with your lender.
If you’re financing, consider asking your lender to reduce or eliminate the closing fees that cover administration, application review, appraisal review, processing, settlement, and more. These fees can add up to thousands of dollars, and nearly everything is negotiable in a real estate transaction. It never hurts to ask.
7. Hire a real estate attorney.
Though some states don’t require you to have a lawyer at closing, doing so can be worth the investment. A real estate transaction is a major event, and closing documents are extremely complicated and jargon-packed.
8. Conduct a title search and buy title insurance.
To ensure the seller has a clear legal claim to the property, hire a title company to conduct a title search
. Not only will your title agent examine public records to verify the seller is the legal owner, they’ll also ensure there are no liens (unpaid debts) associated with the property.
Don’t skip this step. A title search can prevent someone from coming out of the woodwork and staking a claim to your property or making you repay a previous owner’s debts. Allow two-to-three weeks for a title company to complete a title search.
For added security, purchase title insurance. This type of indemnity insurance will protect you (and your lender) from financial loss should any issues arise relating to title defects, liens, or encumbrances.
9. Choose a homeowner’s insurance plan.
Most lenders will require
proof that you have homeowner’s insurance on the property you’re purchasing. Even if you’re an all-cash buyer, protect yourself by getting this type of coverage.
10. Conduct the final walk-through.
Just before closing, arrange for a final walk-through. During your visit, check to make sure the home hasn’t been damaged since the home inspection. Confirm that any fixes the seller agreed to make were carried out and that they didn’t remove items or features included in the purchase agreement (like appliances or light fixtures).
11. Be cautious with your finances.
As closing day approaches, be careful. Don’t make any major purchases, miss payments, or open new credit accounts which could make your lender rethink your mortgage agreement. Update your lender if you’ve switched jobs or have taken on any new debts since applying for your loan.
12. Do final prep for closing day.
A few days before the closing, your lender should have sent you closing disclosure documents. Read them carefully and make sure all the information is correct and matches the terms outlined in the loan estimate.
Review the seller’s disclosure document, which is required by law. It will list all the property’s known defects, such as water damage or lead paint. If anything raises a red flag, carry out a second home inspection or renegotiate the deal.
Finally, gather any required documents and funds (including the money you’ll need to bring to the closing table). At a minimum, you’ll need:
- Your driver’s license, passport, or other government-issued photo ID
- A cashier’s check or certified check for closing costs
- Proof of your homeowner’s insurance
13. Be vigilant at the closing.
In many states, your real estate lawyer will represent you at the one-to-two-hour closing
. Even so, take the time to review and understand all the documents, making sure the information and terms are all accurate.
*Be sure to check local requirements, there can be significant differences from state to state.