Learn About the Real Estate Closing Process and How a Lawyer Can Help
Closing day for a mortgage usually occurs four to six weeks after you sign the sales and purchase contract. The exact date you can expect to close fluctuates depending on the details of the transaction. At a mortgage closing, you will sign your mortgage and other documents, make necessary payments, and finally, get access to your new house.
Some homebuyers think it is only necessary to have a real estate lawyer present during complicated closings, but it is actually advisable to have an attorney present to protect your interests during any type of closing. This will help ensure the sale closes properly and give you a chance to work through any issues that may arise during the process. The steps of a mortgage closing process are as follows:
- Opening an escrow account
An escrow account, also called an impound account, is set up by a mortgage lender for the purpose of paying property-related expenses. In a mortgage deal, an escrow account acts as a savings account that is managed by a mortgage servicer. The servicer deposits some of the mortgage payment into the escrow account, which covers the property taxes and insurance premiums. An escrow protects the relevant payments and documents until the deal is closed, so setting up an account is a great way to protect the best interests of each party. An escrow helps create a secure transaction and a smoother overall mortgage process.
- Doing title search and registering title insurance
The purpose of a property title search is to examine public records of the property that confirm its rightful legal owner. A simple title search will also reveal if there are any claims or liens on the property that could impact the transaction. Furthermore, it will uncover any judgments on the property. You can have your real estate attorney conduct the title search for you and elevate your level of protection.
Registering the title insurance will provide some powerful protections for you. Specifically, title insurance protects lenders and buyers from financial loss because of defects in a title to a property. Some of the most common claims filed against a title are back taxes, liens, and conflicting wills.
To paint a picture of how this confusion could happen, if you get comfortable and settled into your new home and someone decides to sue you by saying they had a claim against your home before you purchased it, your title insurance would protect you. The rates of title insurance can vary depending on the provider, but it will usually be about .45% of the purchase price.
- Negotiating closing costs
Some new homeowners are under the impression that they only need to take the mortgage into account when planning for their budget, but this is the wrong impression. When closing on a house, closing costs come into play in a major way. Typical closing costs are between 2-4% of the home price, which can really add up.
However, it is possible to negotiate closing costs, and it will be even more possible if you have the help of a real estate attorney on your side. When attempting to lower closing costs, there are a few different aspects we take into consideration. For one, we will want to look at the “services you can shop for” as chosen by the lender. This includes the pest inspection fee and the survey fee. The vendors listed here are preferred by the lender, but it is not mandatory to use them. If you would prefer to shop around and find the same services for less, that is certainly an option.
For those who are struggling to come up with closing cost fees, all hope of your dream home is not lost. It is also possible to ask the lender for a discount from their standard fees and to ask the seller to contribute to closing costs. If they agree, this would be shown as “seller credits” on the loan estimate form.
Another option would be to ask the lender if they can fold the closing fees into the mortgage and allow you to pay it off long-term. It is important to keep in mind that while this saves you money upfront, it can cost you more in the long run. Like with any financial decision, it is wise to weigh all your options and understand what you are getting for your purchase. We can help instill that sense of confidence in your purchase.
- Conducting the home inspection
When inspection day rolls around, it marks your last chance to discover defects within the house. This is essential because it is also your last chance to convince the seller to pay for any defects before the home is officially yours. During the home inspection, a professional home inspector will examine the home’s foundation, structural components, roof, HVAC system, plumbing, and electrical systems.
A typical home inspection takes between two to four hours but can take more if the house is of a larger size. Within days of the home inspection, the seller will send a written report with their findings. Being present for the home inspection will allow you to gain a full understanding of the process and to receive as much information as possible. This will make it possible for both yourself and for our team to make sure you are getting the deal you signed up for, and to negotiate payments if you are not.
- Conducting a pest inspection
You might think a pest inspection and a home inspection go hand-in-hand, but this is not the case. Home inspections differ from pest inspections in a variety of ways. A pest inspection is required by banks and lending institutions for the purpose of ensuring that homes avoid damage from termites and other insects before closing a sale.
During a pest inspection, a professional pest inspector will examine the interior and exterior of the property to look for concerning signs of moisture that could lead to wood-destroying insects like termites. The inspector will also keep an eye out for signs of pests like droppings, random wings, and tunneling. Similarly to a home inspection, when the pest inspection is finished, you will receive a report that lists any potential problems and areas of concern when it comes to pests in your future home. A pest inspection can cover the following critters:
- Bees
- Bedbugs
- Carpenter ants
- Cockroaches
- Earwigs
- Flees
- Mosquitoes
- Moths
- Rodents
- Scorpions
- Silverfish
- Spiders
- Termites
- Wasps
- Sealing your interest rate
An interest rate is used to calculate the interest payments that you, as the homebuyer, will owe the lender. Interest rates are not cut-and-dry numbers. They can change based on location, property type, type of loan, and the homebuyer’s credit score.
In New York, the average interest rate for a 15-year fixed mortgage is 2.44%, while the average interest rate for a 30-year fixed mortgage is 3.14%, which is the most common term for a fixed-rate mortgage. When it comes to sealing your interest rate for the duration of your mortgage, it is ideal to do this in advance. This will save you from having to deal with the natural ups and downs that come with the market.
Having a real estate attorney who is advocating on your behalf can make you more likely to secure a strong rate. This is especially helpful if you have never purchased a home before, as you might be less familiar with what to expect and how to know when you are getting a fair deal.
- Clearing contingencies
In the real estate world, a contingency refers to the condition or action that must be met in order for a real estate contract to be binding. During closing, both parties agree to the terms of the contract, and a deal becomes final. A real estate attorney can come in handy during this portion of the deal because we can help you through difficult contingencies and give you a better understanding of your rights. There are many different types of contingencies that can affect your purchase, including:
- Appraisal contingency – This is used when the buyer would like to guarantee that the property is valued at a minimum of a specific amount.
- Financing contingency – With this type of contingency, the buyer has more time to get their finances in order to make the transaction.
- Home inspection contingency – This type of contingency gives the buyer a chance to have the property inspected and negotiate the purchase price accordingly.
- Home insurance contingency – This type of contingency requires the buyer to purchase a home insurance policy. It is typically the seller or lender who adds this contingency.
- Right to assign contingency – This clause is specifically designed for wholesale real estate investors. It gives them the opportunity to back out of a deal if they are unable to assign the real estate contract to another buyer in a set amount of time.
- House sale contingency – This type of contingency sets the parameters for a certain period of time to allow the buyer to finalize the sale of their current property.
- Kick-out clause – This protects sellers when their buyers are using a house sale contingency and allows them to turn their back on the deal if they find a buyer who is already qualified.
- Title contingency – This contingency provides protection for the buyer in the case that there is an issue with the title and allows them to back out if the issue cannot be resolved.
After your home’s value is confirmed with an appraisal and you sign the paperwork, the property will be yours, and your real estate attorney can protect your best interests every step of the way. To learn more about how Belushin Law Firm, P.C. represents commercial and residential property buyers, call us at (888) 918-9890 or contact us online.