Once you come to an agreement and enter a contract with the seller, the closing process begins.  The are a myriad of decisions you will need to make as you navigate through this part of the process, and it’s important that you choose experienced and helpful professionals to guide you through the process.  There are several standard contingencies in a contract that are designed to protect your interests as the buyer so you can get out of the deal if the home has major problems or damage that affects its value.

One of the first steps is to have the home inspected.  Ask your agent and your friends and family if they can recommend a good inspector.  The inspection is not only an opportunity to discover defects and negotiate with the seller to have them repaired.  It is also a critical opportunity for you to learn the ins and outs of your new home.  Ask the inspector if you can shadow them during their inspection or at least have them point out important features. While the home inspection covers all the major systems of the house, it’s important to realize it is a visual inspection so the inspector is not Superman and can not see through the walls.  They also aren’t fortune tellers so there is no way for them to predict problems that could arise in the future.  That being said, a good inspector will be knowledgeable and provide sound advice.  Take advantage of this opportunity to ask lots of questions so that you understand the condition of the home you are buying.

During the inspection period, you will also need to hire a termite inspector.  While the contract requires the seller to pay for termite treatment, you will need to negotiate any repairs caused by termite activity as part of your inspection.  My suggestion is that you perform your home inspection at the beginning of your inspection period so that you have enough time to bring in experts (eg. HVAC technicians, roofers, structural engineers) if you need their opinion or an estimate. Once you perform all of the inspections, it is time to start the negotiations again to work towards a reasonable agreement.

The next important  step is making a loan application and locking your interest rate.  As soon as you enter a contract, you will need to supply your lender with a copy of the contract.  It’s a good idea to read through the loan obligations listed in the contract so that you understand what is expected of you.  Standard contracts dictate that the buyer instruct their lender to order their credit report and appraisal soon after you enter a contract.  While many consumers would like to wait to order the appraisal until they get through the inspection, the contract does not allow for the buyer to delay the loan process.  If you have a concern and want to hold off on paying for an appraisal, you need to negotiate with the seller to allow for this extra time.

Your lender will require proof of a valid homeowner’s insurance policy, so you will need to get this lined up prior to closing.  In addition to protecting the home itself, you should also consider personal property and liability coverage.  Many providers will offer a deal if you bundle all of your insurance plans with them. You also might want to consider purchasing a yearlong service contract with a home warranty company that will cover the cost of unexpected repairs or replacement of major systems and appliances.  When a system or appliance breaks down from normal wear and tear, you contact the home warranty company which sends a technician to fix the problem.

As you are negotiating repairs, waiting for the appraisal results and obtaining homeowner’s insurance, all of the involved parties (eg. lender, insurance agent) will work with a title company to coordinate the details of your closing. The title company checks the property’s title records and looks for liens (claims on the property as security for money owed), overdue special assessments or other claims or outstanding restrictive covenants filed on record, which would be obstacles to the sale. Once the title is deemed legally “free and clear,” the company will offer title insurance as reassurance of a clear transfer of the home. The closing agent also works closely with your lender to set up the escrow account and compile all the necessary loan and real estate documents.

When it comes time for closing, you will likely be distracted with the logistics of the move and in a hurry to close.  It’s important that you complete a final walk through of the house before you close to make sure the house is in the condition you expect it to be in. If the seller completed repairs, ask for receipts and consider re-inspecting the home.  If you asked the seller to leave any appliances or furnishings as part of the purchase contract, check to make sure these were done.  You also should ask for a copy of the HUD-1 Settlement Station which outlines the loans terms, exact amounts of money that will be exchanged at closing and how they will be disbursed, and total amount of funds you will need to bring to closing in the form of cash or a cashier’s check. Review it carefully and contact your lender if there are any errors.

At closing, the closing agent will have a stack of documents he or she will review with you and the seller. Read each one carefully before signing and ask questions about items you don’t understand. The documents include the:

• Mortgage note which outlines the buyer’s promise to pay back funds borrowed from the lender with the house as security
• Mortgage or Deed of Trust which shows that a lien is being placed on a property and allows the lender to foreclose on the property if the borrower defaults
• HUD-1 Settlement Statement
• Warranty Deed which transfers the title from the seller to the buyer
• Commitment for Title Insurance which indicates that the title company will issue title insurance to the buyer if certain requirements are met, such as payoff of the seller’s current mortgage and evidence of the buyer’s new mortgage.

After all legal documents are signed, the title company will officially record the deed and other legal documents with the appropriate government agencies.  Be on the lookout for the title inurance policy which will arrive in the mail after closing.  Finally, now is the time to celebrate because the house is finally yours!