You have finally come to an agreement to buy or sell a house… and made it through the inspection. Now what? Why does it usually take another month to close?!
After agreeing on terms followng the inspection, the final steps to closing include…
- Appraisal – this is the biggest next step
- The property must appraise for the value of your purchase price or greater in order to secure the loan
- Most of the time the value comes in fine and you move on to the next steps
- If the appraised value comes in lower than agreed upon purchase price
- Buyer and seller can renegotiate price/terms at the appraised value
- Buyer can make a bigger down payment to make up the difference (this isn't even an option for many buyers)
- Purchase agreement can be canceled, with earnest money refunded to buyer
- Title Work – buyer pays to have their title company do a title search to assure title is clear
- If there are any issues it is the seller's responsibility to clear them before closing
- If the seller has owner's title insurance, the insurance company writes a Letter of Indemnity (LOI) assuming responsibility for clearing title after closing so closing can take place as scheduled
- If the seller does not have owner's title insurance, the seller must clear title before the property can close, which could take days, weeks or months depending on the situation
- Mortgage Underwriting – this is the final step before closing
- Appraisal and title work must be approved by the underwriter
- Buyer must lock in interest rate, if not already done after purchase agreement was signed by both parties
- Financial status of the buyer must also be approved by the underwriter
- This can include many details, and don't be surprised if they ask for more documentation than you ever thought possible!
- What documentation they request will depend on your individual circumstances, but you must show a paper trail for all funds you intend to use for your purchase
- Property insurance for the first year must be paid and in place
Once underwriting declares the file is 'CLEAR TO CLOSE' you are ready to close… and all you have to do is get a casher's check payable to your title company to bring to closing… and get everything packed and ready to move!