After an offer has been accepted, it is time for your Realtor to manage that potentially stressful period called contract-to-closing. In addition to more tangible issues listed below, a full-service Realtor will help you manage the many personal issues that may come up before you are sitting at the settlement table.
A timely implementation of this list of closing activities will help make the entire process proceed more smoothly.
1. Select the closing attorney
As the buyer, it is generally your choice to select the closing attorney. However, some sellers such as banks and builders require that their attorneys take part in the closing. If that is the case, most buyers choose to use the same attorney in order to eliminate the cost of second attorney. In addition to reviewing the sales contract and preparing the settlement statement, the attorney typically orders the title search and title insurance. Someone in the attorney's office works with the lender to ensure that the funds needed from the lender are available for the closing.
2. Assist with property survey
The lender may require a survey, or plot plan, of the property. This is done to confirm that the property's boundaries are as described in the sales contract. Usually the buyer pays for the survey and the lender orders it. You may be able to save some money by requesting an "update" from a surveyor who has surveyed the property previously.
3. Assist lender with the appraisalAlmost always lenders require that the property be appraised by a licensed appraiser before issuing a Loan Commitment Letter. For cash deals, you may want an appraisal done before you execute the sales contract.
4. Review the Loan Commitment LetterBefore you made an offer to purchase, you probably were given a pre-approval letter or at least a pre-qualification letter by a lender. Now that you have a contract, it is time to supply your chosen lender all the necessary documentation so that the lender can issue you a written Loan Commitment Letter. This document will typically state that your loan approval is subject to certain conditions. Typical conditions include a property appraisal, a survey, completion of requested repairs, and no significant changes to your credit worthiness.
5. Order a general Property InspectionWe strongly recommend that you have the home inspected by an licensed home inspector that is working for you. This is true even if the home is new and the Builder offers a warranty. Since the sales contract probably includes the inspection as a contingency, it is best to get this done quickly. This allows time for repairs and allows the closing date and time to be set sooner and more accurately.
6. Order a Termite InspectionLenders typically require homes in South Carolina be inspected for termites before they will finance a purchase. You need a certificate from a termite inspection firm that states that the property is free of both visible termite infestation and termite damage. Because we want the inspection company working for you, not the seller, we recommend that buyers order and pay for this inspection.
7. Obtain Well and Septic Certifications
If your property is not served by public utilities, you will need local government certification of the private water source and sanitary sewer facility before closing. Usually the county government performs the certification.
8. Inquire about a Certificate of Occupancy
If you are buying a new house, a certificate of occupancy needs to be provided at closing. This certificate is legally required before you move into a newly constructed home. The builder obtains the certificate, usually from the city or county. An inspection may also be required to see if the property meets local building codes.
9. Finalize the Closing Date An estimated closing date is normally specified in the sales contract. After inspections and requested repairs are complete, and after your mortgage loan is approved and the commitment letter is accepted, a firm closing date and time is set. You need to be sure that closing takes place before the lender's commitment expires and while the interest rate lock-in period, if there is one, remains valid.
10. Obtain Homeowner's Insurance
Your lender will require that you purchase homeowner's or "hazard" insurance, which protects you and the lender from loss in the event the house is damaged or destroyed. Coverage must be equal to at least the replacement costs of the property. Lenders typically want the first year's premium to be paid at or before closing. If your down payment is less than 20 percent, your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in an escrow account (or reserve). Then, the lender pays the insurance bill when it is due each year.
11. Inquire about Private Mortgage Insurance
Private Mortgage Insurance (PMI) helps protect the lender in case of a foreclosure. Typically, the lender will require this insurance if your down payment is less than 20 percent of the purchase price of the property. The lender orders PMI from a mortgage insurance company after your loan is approved. Premiums are typically added to the monthly mortgage payments. According to the Home Owners Protection Act of 1998, lenders must cancel PMI on any loan originated on or after July 29, 1999 once the Loan-to-Value reaches 78%.
12. Schedule utilities and other services
Scheduling utilities and other services to be activated or installed is important to the success of your move to your new address.
13. Review HUD-1 Settlement StatementThroughout the contract-to-closing period, the closing attorney is gathering information for the HUD-1 Settlement Statement. If requested, the law requires that you, the borrower, have access to the HUD-1 Settlement Statement for your review at least 24 hours before closing.
14. Final Walk-Through Inspection
Your sales contract may have a clause allowing you to examine the property within 24 hours before closing. This is your opportunity to make sure that the seller has vacated (or is vacating) the house and left behind whatever property was agreed upon. If the home is still being completed by the builder or repaired, this is your opportunity to make a final personal inspection. You will want to make sure that all conditions of the sales contract have been met. If you observe major problems, you have the right to delay the closing until they are corrected.