The Essential 7-Step Home Closing Checklist

• Set a date
• Confirm what you need to bring to closing 
• Review your closing documents
• Complete your final walkthrough
• Get your closing funds ready
• Attend your closing appointment
• Make your move

1. Set a date

The first step in your home closing checklist is pretty self-explanatory. Once you’re approved for financing, your lender will reach out to schedule a closing date. Who needs to be at closing? It varies, but you may want to have your real estate agent, your closing agent, your lender, the seller, and any other borrowers on your loan present at closing. Oh, and you. That’s a big one.

2. Confirm what you need to bring to closing

Once you’ve set your closing date, get in touch with your real estate agent or mortgage lender to confirm everything you’ll need to bring to closing. Some common items include:

• A form of government-issued ID
• Payment for your closing costs
• Proof of homeowners insurance

Typically, your finalized closing documents will be provided for you to sign at closing. More on closing documents next.

3. Review your closing documents

Your lender is legally required to send you your closing documents at least three business days before your closing date. Don’t wait until the last minute to review them, though! Take as much time as you can to comb them thoroughly for any spelling errors, math mistakes, or unexpected fees. If you find errors in your closing documents, make sure to let your lender know as soon as possible so they can correct the mistakes. And if you have any questions about closing or the documents involved, now is the time to ask.

4. Complete your final walkthrough

About 24 hours before your closing date, you and your real estate agent will have the opportunity to walk through the home and make sure everything is aligned with what you’ve agreed to purchase. This could include a lot of easy-to-forget details, so we recommend bringing a final walkthrough checklist along to ensure you don’t miss anything that matters to you.

• Check locks on windows, doors, and gates
• Make sure windows, doors, and gates open and close properly
• Confirm appliances are functional
• Check for mold (especially in damp areas like under sinks)
• Test all electrical outlets
• Test the thermostat and HVAC system
• Check floors, walls, and ceilings for damage
• Look for signs of pests, like mice and ants
• Make sure the irrigation system is functional
• Make sure all agreed-upon repairs have been completed

5. Get your closing funds ready

Whether you’re paying by cashier’s check or wire transfer, make sure you have your payment ready to go before closing. If you’re transferring funds from a different account, don’t forget to leave enough time for the transaction to process before your closing date.

6. Attend your closing appointment

Today’s the day! Gather up your documents and meet at the closing table. Plan for the appointment to take up to two hours. During the appointment, you’ll sign your closing documents, pay your closing costs, and get your keys. Feels good, doesn’t it?

7. Make your move

The house is yours, and now it’s time to move in. Whether you’re moving across the country or across the street, it’s always best to have a game plan for moving day. Are you hiring movers or calling in a favor with friends? Where will your pets be while your belongings are being moved? When does your mail need to be redirected to your new address? The more questions you have answered before moving day, the less stressful your move will be.

Pro Tip: Nail your move with this handy checklist.

Understanding the closing timeline

With all these steps involved, you’re probably wondering just how long it takes to close on a home. A lot of factors determine the closing timeline, including how complex your loan is, how many loans your lender is processing in addition to yours, and the seller’s move-out schedule. In general though, it takes 30-45 days to close. If you’re anxious to get through it, there are a few strategies you can try to move the process along faster:

• Get pre-approved before making an offer
• Agree to buy the house as-is
• Avoid making any big purchases until after closing

Remember, buying a home is a big commitment. Don’t rush the process and miss out on potential savings and peace of mind along the way. Between your home closing checklist, your final walkthrough checklist, and your moving checklist, you’re more than prepared to close on a home, the right way. Ready to get started?

Getting pre-approved, buying your home as-is, and waiting until after closing to make big purchases are all good ways to get through your home closing checklist faster.

The post The Essential Home Closing Checklist appeared first on Cardinal Financial.

#1. Interest Rate 

Let’s cover one of the basics first. An interest rate is fundamental to all forms of lending. In its simplest form, interest is what you pay a lender to borrow money on top of your principal, or the original amount you borrow. While you’ll always pay back more than what you borrowed, a lower interest rate means you’ll pay back less “extra.”

A lot of things go into determining your specific interest rate, including the amount you’re borrowing, your down payment, your credit score and history, and the length (or term) of your loan. Oh, and market conditions. Market conditions can affect the environment around you—including whether or not you’re in a buyer’s or a seller’s market.

#2. Buyer’s/Seller’s Market

When you’re ready to buy a home, your real estate agent may tell you it’s either a “buyer’s market” or a “seller’s market.” The former, a buyer’s market, is better for you, the borrower, because it generally means there are more available homes than buyers, which means less competition and lower prices. The latter, a seller’s market, is more competitive—often leading to bidding wars and greater potential for losing out on the home you’ve had your eyes on due to increased competition.

In a seller’s market, where homeowners are looking for top dollar from buyers, it’s important to have a bona fide pre-approval from your lender. If you’re interested in knowing what you can afford to offer before you start your house hunt, get your free rate quote here. 

#3. Buydown

A buydown is related to both your interest rate and the market you find yourself in, and it allows borrowers to use cash to temporarily lower their interest rate for a set amount of time—usually one, two, or three years. For example, a 3-2-1 Buydown might allow you to lower your original rate by 3% during your first year of homeownership, 2% during your second, and 1% your third before going back to your initial interest rate.

How are buydowns paid for? There are different methods, but one of the most common is the application of seller or builder credits, issued at closing. So, for example, if your seller offers a $15,000 closing credit, you may be able to apply that cash to the purchase of a temporary buydown. In a high-rate environment or a buyer’s market, where sellers are under a little more pressure to sell, this option could save you thousands of dollars over the lifetime of your home loan.

#4. Closing Costs 

Speaking of closing credits, let’s go over closing costs. Closing costs typically include all of the different fees you’ll pay in addition to the price of your new home, like appraisal, attorney, escrow, and title fees, as well as credit report costs. More often than not, you’ll pay for those with one check at the end of your purchasing process (and they may be included in the same check you write for your down payment). 

A good lender can help you plan for those fees ahead of time to ensure you have the cash set aside when the time comes to spend it.

#5. Equity 

Equity is the overall value of your home, minus your remaining mortgage balance. Like interest rates, your home’s value may fluctuate over time with market conditions, but as long as you owe less than what the property is worth, you’ll have equity. 

Like interest rates, your home’s value may fluctuate over time with market conditions, but as long as you owe less than what the property is worth, you’ll have equity.

For example, if your home is worth $400,000 and your mortgage balance is $300,000, you’d have $100,000 in equity. You can increase your home’s value and subsequent equity by paying down the balance, or by remodeling or renovating the property. 

Did you know that a mid-range kitchen remodel has a return on investment of almost 60%? According to Zillow, a $64,000 remodel can add almost $38,000 of value to your home. 

For additional ideas, check out another of one of our recent blogs, The Renovating a House Checklist You Absolutely Can’t Skip.

#6. Loan-to-Value (LTV) 

LTV, or loan-to-value, is a ratio used to describe the overall size of your loan versus the value of the home you’re buying. It will always be expressed as a percentage and comes from dividing the loan size by the home’s value. LTV is critical in determining your loan options, borrowing power, down payment, and whether or not you’ll need to pay private mortgage insurance (PMI).

Some home loans will require an LTV of 97.5%, which means you’ll need to put down just 3.5%. Other home loans require an LTV of 95% or less, which will require a higher down payment. Remember this general rule of thumb: The higher your down payment, the lower your LTV. 

Remember this general rule of thumb: The higher your down payment, the lower your LTV. 

#7. Debt-to-Income (DTI) 

DTI, or the debt-to-income ratio, is the percentage of your gross monthly income that’s used to pay monthly debts, and it helps lenders determine how much of a risk you are. Borrowers with a low DTI are generally seen as better with money management, and therefore less risky. The exact formula for calculating front-end DTI is:

DTI = (Expenses ​/ Gross Monthly Income) x 100

DTI is often split into two forms: Front-end and back-end. 

• Front-end DTI compares the cost of your living expenses (i.e. rent or mortgage) to your gross monthly income.
  • If your mortgage payment is $1,500 and your gross monthly income is $6,000, your front-end DTI would be 25%. 

• Back-end DTI includes other financial obligations, like credit card payments, student loans, car payments, child support, alimony, and more.
  • If your monthly debts amount to $825 and your gross monthly income is $4,750, your back-end DTI would be 17%. 

So what’s a “good” debt-to-income ratio? We cover that in depth in this blog, but a lower DTI is always better. Different mortgages have different debt-to-income requirements, and lenders may have additional requirements beyond that to help mitigate risk. 

#8. Funding Fees

Funding fees, like closing costs, are fees that borrowers pay to fund the loan and protect lenders from loss. Government loans like VA and FHA loans have funding fees, but those may be waived depending on individual loan circumstances. Your loan originator can help you find out if waivers are available for your specific loan type.

#9. Loan Originator

Speaking of loan originators, these professionals are different from mortgage brokers, because they’re representatives of the financial institution that’s helping buyers with the mortgage application process. A mortgage broker, on the other hand, is a licensed professional who works on your behalf to secure financing. 

Basically, a loan originator works for a lender and a broker is an independent agent. 

#10. Underwriting 

Once your application is complete and submitted (but before you get keys at the closing table), you’ll go through underwriting. Underwriting is the process lenders use to assess an applicant’s income, assets, credit, and risk. 

During this process, lenders comb through your personal information and financial records to determine whether or not you qualify for a loan. They’ll determine your LTV, your DTI, your interest rate, and your closing costs, so it’s important to get your affairs in order well ahead of time to ensure the process isn’t held up. 

Did these mortgage definitions help you better understand the mortgage process? Is there anything else we can clarify for you? Let us know on social media, check out our full glossary, or get in touch with one of our experts for more information. We’re always here to help!

The post Home Buying, Defined: 10 Mortgage Definitions You Need to Know appeared first on Cardinal Financial.

Good news: It doesn’t have to be scary. In fact, we believe homeownership should be as simple as possible. That’s why we’re here to answer the questions every potential buyer seems to ask when going through the process.

Today, we’re talking about closing costs and answering the question that’s on everyone’s mind: When are closing costs due?

But First: What Are Closing Costs?

You found the house. You got the loan. What else is there to do but sign the paperwork and move in?

Turns out, buying a home isn’t like your typical purchase where you see something you want, throw some cash down, and call it yours. The powers that be decided buying a home should involve more steps, more time, and more money.

These additional steps and costs are what we in the industry call “closing costs.” And while they’re necessary for general peace of mind—yours, the seller’s, and the lender’s—they can be a little convoluted and, for some, quite confusing.

Here’s the gist: Closing costs consist of a variety of charges for services and expenses required to complete your mortgage. These costs may include property fees (appraisals and inspections), loan fees (for applications, attorneys, and origination), insurance fees, title fees, property taxes, and even postage fees.

The number of closing costs may vary, which is why it’s important to make sure all closing costs are included or itemized on your loan estimate and closing disclosure. In fact, they’re required by law to be disclosed and agreed upon in advance. That’s why you want to partner with a dependable lender with transparent processes (hint: that’s us).

What Kind of Closing Costs Can You Expect To See?

The list of potential closing costs is long, and while we’d love to define all of them for you, you’re not here for a novel. Instead, we’ve assembled this handy little list of definitions for the most common closing costs to look out for. Happy reading!

• Appraisal Fee: Before you buy, you and your lender want to make sure the home is worth what you’re paying. Your appraisal will determine that.
• Discount Points: These “fees” are optional–you might choose to pay more to lower your mortgage interest rate. Get in touch with our loan experts to find out more about discount points.
• Escrow Fee: This fee is paid to a third-party escrow (or title) company that holds your deposit on the home (your earnest money). This deposit will be applied to your down payment or other closing costs on closing day.
• Origination Fee: This is what a lender or broker charges for their services, usually around 1% of the loan amount, and may be negotiated.
• Prepaid Taxes & Insurance: Many mortgages require borrowers (that’s you) to pay taxes and insurance premiums for up to a year in advance. Take note: These costs may get lumped into your escrow account too.
• Title Insurance Fee: This one varies in cost but is used to ensure the property you’re buying can actually be transferred to you.
• Underwriting Fee: This fee pays for the documentation, coordination, and filing it takes to complete your underwriting process and loan approval.

How To Reduce Your Upfront Costs

As if taking out a mortgage for your home wasn’t expensive enough as is, adding on the down payment and closing costs can be a lot for some borrowers to swallow. If you don’t have all the cash for those costs on hand, you may be able to roll them into your actual loan.

We should warn you that rolling closing costs into your loan is (typically) only a viable option for refinancing—not purchasing. For our refinance readers, here’s what you ought to know:

Rolling closing costs into your refinance is fine so long as those costs don’t push your loan amount over a lender’s LTV (loan-to-value) and DTI (debt-to-income) thresholds. Those numbers may not be adjusted to accommodate rolled-over costs.

For the folks who are looking to reduce their immediate upfront costs on a purchase, don’t worry—you still have options:

1. Scaling back on that down payment and using some of that money for your closing costs is one way. Your monthly mortgage payment will go up, but you’ll lessen the blow of one-time closing costs. However, we should warn you that reducing your down payment will increase your loan-to-value ratio, or what we in the industry call “LTV.” Once that ratio passes a certain threshold (80%) you’ll be required to pay private mortgage insurance (PMI).
2. If trimming your down payment isn’t as palatable, you might want to negotiate seller concessions. “What’s that?” Glad you asked—a seller’s concession is when the seller (obviously) agrees to pay certain fees on the buyer’s behalf. Concessions might be tricky to pull off, and you may want to throw any money you save on the closing costs at your down payment.
3. If neither of those options work (and if this is your first time buying a home), explore the option of pursuing first-time homebuyer assistance. Saving up for these costs and associated fees is a lot to ask of a person, but there are grant and loan options available to help you combat these hefty upfront costs.

“Gotta Know” Glossary:

• Loan-to-value ratio: This is the number lenders use to calculate their risk on a loan. How is it determined? Take the loan amount and compare it to the market value of what the loan is funding. For conventional loans, if the LTV is higher than 80% you’ll have to pay for private mortgage insurance.
• Debt-to-income ratio: This is the percentage of monthly income spent on debt payments (credit cards, car loan, etc.). Lenders usually like this number to be at, or preferably under, 40%.

When Are Closing Costs Due?

This seems like an easy answer, right? “At closing,” you might say. But as with anything mortgage-related, there’s a more complicated answer that you need to know.

The list of closing costs is exhaustive (and between us, a little exhausting), and can be broken into two categories: “Before closing” and “at closing.” Here’s a list of common closing costs and when they’re due:

Before Closing

• Appraisal fees
• Inspection fees

At Closing

• Application fee
• Attorney fees
• Credit report fees*
• Flood zone certification fee
• Government taxes and fees
• HOA (homeowners association) dues
• Home insurance fees
• Mortgage insurance fees
• Processing fees
• Property taxes
• Title fees
• Underwriting fees

Your team—consisting of your lender and your real estate agent—can help guide you through a complete list of which closing costs are due at what point. That being said, you can rest assured that most of your closing costs will, in fact, be due at closing. Just be sure to set aside a chunk of cash for the handful of fees that aren’t.

*Some lenders may collect this fee before closing.

As if taking out a mortgage for your home wasn’t expensive enough as is, adding on the down payment and closing costs can be a lot for some borrowers to swallow.

Ready to Get Started?

Now that you know more than you likely ever wanted to know about closing costs, it’s time to get started on your purchase. Check out our calculator to find out how much you can expect to pay each month, or connect with the experts at Cardinal Financial today to secure a loan with favorable terms and total transparency. We’ve got you covered from application to closing—count on it.

Let’s take this conversation to social media. If you’ve got additional questions about closing costs (or if you’ve got an experience you’d like to share), drop a comment on Facebook or Twitter and we’ll get back to you.

The post When Are Closing Costs Due, and What Do You Need to Know About Them? appeared first on Cardinal Financial.