M is for Money

This is Part 9 of The First Time Home Buyer: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7 and Part 8

Closing is the final act in buying a home. This is where you put pen to paper and sign the documents making this house, your house. But there are a few final preparations you need to make to ensure your closing is simple and surprise free.

Final Walk Through

You absolutely must do a final walkthrough before closing on the house. The walk through allows you to verify that any agreed upon repairs have been completed. You can ensure that the house is still in the condition you expected and that nothing has been removed from the house improperly. If there is a problem with the house or a disagreement with the seller, don’t go through with closing until it has been resolved. It’s much harder to deal with problems after you’ve signed the paperwork and the money has changed hands. Be thorough in your inspection, I’m embarrassed to admit some of the things I overlooked. In my case the sellers never completed painting the exterior, I bought a house with 3 brown walls and one pink wall!

Show Me the Money

It takes money to close on a house. Already you have shelled out a deposit and possibly the cost of an inspection and appraisal. The remainder of the balance comes due now. There is a long list of costs and fees associated with closing:

-Down payment
-Escrow or lawyer fees
-Title insurance
-Recording fees
-Appraisal and inspection if not already paid
-Broker’s or agent’s fees
-Tax and insurance impounds
-Miscellaneous Junk Fees

The impounds are often a surprise to first time buyers. Many lenders collect your yearly property tax and homeowners insurance along with your payment, then they pay the bill when it comes due. At the start of the loan they will demand some amount of that money up front, often 6 months to a year’s worth. This could add several thousand dollars to your closing costs. Many of the fees are unavoidable, like the cost for the government to record the title in their records.

Closing Cost Statement

When you apply for a loan you receive a Good Faith Estimate for your closing costs. This would include the down payment, any points and the many fees associated with the transaction. In my case, the estimate was off 100%. It’s important to compare the estimate you receive against the actual closing costs. Often lenders will insert needless fees that you can negotiate. Errors are common in these statements as well, I can’t remember how many I found in mine. Go through it carefully and be prepared to question any fee you don’t understand. I got both my agent and the mortgage broker to eat some of their fees. They’ll try to charge you for printer ink and copy paper too, if you let them.

Loan Paperwork

Signing the paperwork will allow you ample opportunity to practice your signature over and over. But it’s important to actually read some of what you are signing, including the terms of the loan. In a previous post I wrote about being screwed by an unscrupulous mortgage broker who managed to slip a different rate past me at closing time. Sometimes there are honest mistakes as well, now is the time to catch them. Closely check that the rate and terms are the same as promised and that no prepayment penalty has sneaked in. A colleague of mine walked away from his closing when the loan paperwork came with a much higher rate.

A Comfortable Closing

All the preparation you have put into this moment will make closing a breeze. In fact, you might not even be there when it happens. At some point the keys will be handed over and the house officially becomes your home. I hope with a little planning, preparation and guidance this house will be everything you dreamed of.

Part 10 - Welcome Home

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