FIRST TIME HOMEBUYERS PART 6: BEFORE THE CLOSING
This is the sixth installment of our 7 part series attempting to familiarize first time homebuyers with the real estate purchase process. Even if you are not a first time homebuyer, and have purchased or sold a home before, you may find this series an informative refresher.
In the last five articles on purchasing your new home, we discussed the various professionals with which you will work, the roles they will play to help you get to contract, some of the due diligence steps you will want to take before executing the contract, and the contract itself. In this article, we will be discussing the process which takes place after the contract is signed, but before the closing.
After the contract is signed, your attorney will order a title report. The title report will be a thorough, exhaustive document on history of the property and the persons involved in the transaction. It will involve a search of the county’s records for all interests in that property and all transactions associated with it, a description of the title, a review of the bankruptcy history of persons related to the transaction, tax records, and other information which the various parties to the transaction will need, as will the title insurance carrier, to complete the sale. The title company is one of the most important entities involved in the transaction, and the buyer, seller and bank look to the title company to determine if the title is in good condition for closing.
By a deadline specified in the contract, the purchaser must obtain a mortgage commitment letter. A commitment letter is one of the most important documents after the contract is executed. Most contracts require that the commitment letter be obtained within 30 days. Failure to obtain the letter may scuttle the deal. Failure to notify the seller within the prescribed time frame may result in some painful financial consequences as well. Therefore, pay careful attention to the mortgage commitment contingency deadline, and work diligently with your bank to obtain the commitment letter.
The commitment letter may contain certain caveats, reservations and exclusions. These exclusions are some of the reasons why it is so important to obtain an extremely thorough and reliable pre-contract inspection. A thorough inspection will help you avoid certain headaches that can be caused by an exclusion.
As discussed earlier, your attorney will work with the title search company to obtain a written title report. There may be issues of title that must be resolved prior to the closing. This could involve anything from open permits, clarification of identity of the parties the to contract, or any other issue which could affect the legal marketability of the title. The parties will each work to resolve any outstanding issues for which they are responsible prior to the closing date.
Cleared for Closing
Once the title issues are resolved, it is often up to the lender to determine when the file is ready for closing. The contract will have a closing date identified in it. Under most circumstances, this closing date is an “on or about” date. The actual closing typically does not take place on this date, although the parties all work diligently to try and achieve the contract closing date.
The primary reason for this is that, typically, the lender determines the true date of closing based upon the lender’s level of satisfaction that the title is in condition to close. While you are waiting for the bank to clear you to close, during the time between contract and closing, the lender will conduct an appraisal. They lender may also have additional questions for you, and you should maintain an open line of communication and respond to your lender quickly. Once the appraisal is complete, the lender is satisfied with the state of the property, and the lender is satisfied with the security interest which guarantees the mortgage , the lender will clear the purchaser to close. At this point, the parties will negotiate a final closing date, the seller will obtain a final meter reading, and the attorneys will exchange documents with instructions on what checks the lender and the purchaser should bring to the closing.
Our office would love to be part of this fantastic step, and to help guide you through one of the most important steps you can take to secure a bright future for you and your family. If you would like to discuss a potential home purchase, don’t hesitate to call us. You can reach us by phone by navigating to our contacts page, or by calling us a (914) 214 9032 or (718) 614 8739.
Here are some helpful links which you may find informative as you work to get to the closing table:
The Consumer Financial Protection Bureau (CFPB)
New York State Department of Financial Services - Lenders
State of New York Mortgage Agency