Preparing for your closing

When a seller accepts your offer, you may want to provide earnest money, which is a deposit you make to show your true intent to buy the home. Earnest money deposits are generally about 1% to 2% of the home’s sale price and are typically paid by personal check, certified check, or wire transfer. Later, when the home sale is finalized, the earnest money can be applied to the closing costs or down payment.

If you decide not to purchase the home for a permissible reason, you may be able to get this money back. However, if you decide not to purchase for a reason not covered in the contract, you may have to forfeit this earnest money. 

As soon as your offer is accepted, the home purchase agreement between you and the seller will oftentimes be contingent on a home inspection. An inspection reveals valuable information about your home’s physical condition and can help you identify issues that need to be fixed. This could be anything from worn-down roof shingles to heating and air conditioning units in need of replacement.

Based on the inspector’s report, you can decide to negotiate repairs into the contract with the home’s seller (meaning the seller can agree to make repairs or reduce the sale price to compensate), make the repairs yourself, or even back out of the purchase of the home altogether.  

Note: not all general inspectors cover every aspect of the home. You may want to consult additional inspectors for the home’s electricity, plumbing, and/or fireplace if needed.

Homeowners insurance rates vary by state and region, but most policies typically cover the following:

• The home in the event of fire, wind, hail, frozen plumbing, vandalism, or theft
• Additional attached or unattached structures on the property (depending on the policy), such as garages and sheds
• Personal property, such as furniture, electronics, clothes, etc.
• Additional living expenses if you need to leave your home temporarily while it’s being repaired under a claim
• Medical payments if someone is injured on your property

You may also need to purchase flood insurance for your home, depending on the location. The National Flood Insurance Program has more information about flood insurance.

Your lender will require you to have homeowners insurance secured before closing. You typically have the option to pay your first year’s premium prior to closing or have it included in your monthly mortgage payments.

Within a week of your offer being accepted, you’ll need to meet with your lender to schedule an appraisal. Your lender will work with the appraiser to determine how much your new home is worth. It’s important to move quickly in this stage so your loan application can be approved.

You may already have majority of the necessary documents compiled if you went through the preapproval process. That makes this step easier!  

The lender will need the following to officially approve your loan:  

• Personal identification (i.e. driver’s license or state-issued ID, passport, military ID, etc.)
• W-2 forms
• Investment and bank account information
• Proof and details of the homeowners insurance you’ve purchased
• Recent tax returns
• A copy of the purchase agreement
• Child support or alimony documents

Work with your real estate agent to schedule a final walk-through of the home to ensure everything is as you expect. If you find issues, such as repairs not completed or items missing, have your real estate agent contact the seller. Find out how the seller plans to correct the issues or if they will give you a closing cost credit to make up for the problems.

The person conducting your closing can provide the exact list of items to bring, but this checklist can be a good starting point:  

• A government-issued photo ID, such as a driver’s license or passport, so the closing attorneys or agents can verify your identity.
• A cashier’s check or certified check for your closing costs if you chose to not wire transfer the funds beforehand. If you did conduct a wire transfer, bring proof of the transfer.
• Your checkbook in case there are any last-minute changes to the amount you will pay at closing.
• Proof of homeowners insurance.
• The Closing Disclosure you received from your lender beforehand. You should have already compared this document to the loan terms you agreed to, but be sure to have it on hand to review the documents at closing, as well.
• Any additional cosigners on your home and loan, including your spouse. Everyone should be present to sign.

Closing on a home is a huge milestone, so it’s important to be prepared for every step.