Your closing begins the day after your sales contract has been signed by both the buyer and seller. As a buyer, you have a unique set of responsibilities that must satisfied in order to execute your closing. The two things that can hinder a smooth closing are the financing of the purchase, and coordinating all of the necessary surveys/inspections/lien search. This guide is specific to the Buyer side of the transaction. Let’s get started.
1. Loan Application (if not preapproved)
As stated, securing financing for your real property purchase is an essential component of performing your closing. Your first priority is beginning that process by applying for your mortgage. Cash buyers bypass this rigorous process; however, they do need to provide the sellers with evidence that they have sufficient liquid funds to close the sale.
Loan approval can go relatively quickly if you present all required documentation promptly and your financial situation is not complicated. It can be more time consuming for buyers who are self-employed or are using other than W-2 income to qualify.
All-cash deals can close whenever the buyers and sellers agree, after all inspection issues are resolved and unrecorded municipal lien searches have been completed. Closing can occur in a week or two. Some all-cash buyers include an appraisal contingency in their contract to confirm that they’re not paying over market value.
2. Earnest Money Deposit
This step and the loan application are interchangeable as far as which priority comes first, but making your Earnest Money Deposit (also known as “putting money down”) on your real property needs to be done as soon as possible after signing your sales contract.
3. Shop/Apply for Homeowner’s/Property insurance
Shopping for your Homeowner’s Insurance policy (also known as Property Insurance) can be a tedious process. The sooner you get started, the more thorough you can be, and the sooner you can finish this step of the process. Exploring Flood Insurance and Wind Insurance are also recommended considering Florida’s weather patterns. Your Homeowner’s insurance agent will need to know the amount of coverage you are obtaining and the amount of coverage the mortgage lender will need along with the mortgage lender’s mortgagee clause (naming the loss payee). Once you have the binder coverage, you will need to provide proof of insurance and payment thereof to the mortgage lender.
In the event the property you are purchasing is a condominium, the structure of the building may be covered by the Association for fire and other hazards. You may need to furnish the mortgage lender with evidence of this master insurance policy. However, the master policy does not cover the contents of the interior of the unit. Therefore, you may wish to consider obtaining a Condominium Owner’s Insurance Policy. Some lenders require this coverage as well. Obtaining an insurance quote, selecting the agent and the coverage should take place early on in the transaction. Waiting can delay the lender’s closing package and impact the timing of your closing.
4. For Condominium/Apartment Sales
If you are purchasing a Condominium, you may be required to file an application with the Condominium Association for approval as a purchaser within the time frame provided for in your contact. Once you are approved, please have the Association issue to you the Certificate of Approval. You must bring this Certificate to closing, as it needs to be recorded with the deed. If you are buying a property that is not a Condominium, but is governed by an Association, you may be required to follow the same procedure. Please inquire to the Association as to whether a Certificate of Approval is required or not. If the property is a Condominium, you should receive from the Seller a set of the Association’s governing documents, per the timeframe on your purchase contract.
5. Inspections (if necessary)
Every piece of real property is unique. Depending on the state of the real property you are purchasing, you may deem it necessary to perform certain inspections to ensure that varying aspects of the property are not deficient or defective. Listed below are some examples of inspections you may deem necessary. We can refer you to inspection agents if you are unable to find agents on your own.
- Water Test
1. Survey (required for mortgages, encouraged for all buyers)
This is a requirement of any mortgage for the purchase of a single-family home, but we recommend it for all our buyers anyway – it’s nice to know exactly where your property lines are, and you want to make sure you know about any potential title encumbrances. This can generally be paid at closing, but in the event that you don’t close on the property the surveyor will still bill you. The buyer is responsible for the cost of the survey.
2. Keep tabs on your mortgage
Mortgage applications can be delayed in various ways, so it’s important to continue to check up on the status of your loan application and processing. Make it a top priority to submit any documents requested by your lender to keep this phase of your closing moving.
3. Appraisal (if loan is secured from lender)
Getting a home appraisal is crucial for several interested parties related to your purchase of real property. Your lender will want to see an appraisal value in order to validate the amount of their loan. You should get an appraisal in order to ensure that you’re purchasing your home for a good price. Most lenders will send their own appraisal.
4. Closing information forwarded to title company – Title Insurance
Title insurance ensures that the seller has legal rights to sell their property, and that ownership of the real property being exchanged cannot be contested by a third party. SFL Title will order your title search, and perform all follow-ups related to your title insurance policy.
5. Contact your utilities companies
Make sure you have your power, water, internet and the like ready to be activated when you move in.
1. Finalize mortgage
As you approach closing, your loan will be finalized. Upon finalizing the mortgage, ensure that your receive a Commitment Letter from your lender, that reflects your interest rate and guarantees. Keep this letter safely filed away.
2. Closing Funds
You will need to arrange for a wire transfer for the cash to close funds on the day before closing. Please contact us and we will provide you with written instructions to give to your bank in order to correctly route the transfer of funds.
If you are relocating from another State, and if you would like to have the proceeds of the sale of your existing home wired to our escrow account to be applied in whole or in part to the purchase, please contact us.
3. Photo ID
At the time of closing, it is required that each purchaser provide an official form of identification to our closing agent. This must include a photo ID, such as your Driver’s License, or a Passport. Some lenders require two forms of ID.
4. Final Steps
Once sign-off on all necessary documents is complete, the transaction needs to be recorded by the county and the formal change of possession must take place. Your agent will arrange for the transfer of the property keys with the other co-agent. The “For Sale” sign and property lockbox will also be removed by the seller’s listing agent so that your home will be ready to move in.