Closing day is an exciting time for first-time homebuyers, but it can also bring last-minute obstacles ahead of the finish line.
Here are some of the most common causes of closing delays, and what buyers can do to avoid them:
1. Last-minute changes to loan terms
Planning ahead can reduce the need for making last-minute mortgage changes that could delay your closing.
The type of mortgage you obtain is one of the biggest financial decisions you will make, and you can work with your loan officer to carefully pick the terms that fit your needs. While it is important to weigh the pros and cons of each option before you close, you will avoid costly delays by making these decisions well before closing day.
2. Money transfer troubles
You’ve saved diligently for a down payment, but do you have a plan for transferring that money?
“Nine times out of 10, the money needs to be wired to the title company or closing attorney, so buyers need to prepare to initiate that wire the day before closing,” says Kevin Dwyer, a SunTrust Mortgage loan officer based in Atlanta.
Since wiring procedures can vary across banks, be sure to ask your bank about its process well in advance of closing day. If your bank requires three days to complete a transaction, for example, you can plan accordingly to avoid a delay at the eleventh hour.
3. Document inconsistencies
Tom, Tommy or Thomas? Buyers might go by many names, but choosing one for the purpose of legal documentation can help you avoid a setback at closing.
“Make sure the first, middle and last name on all documents are aligned,” says Fred Kreger, vice president of the National Association of Mortgage Brokers.
The spelling of your name should be consistent on your driver’s license, credit report and any other documents you are asked to sign or present during the mortgage application process.
4. Credit check curveballs
Homebuyers may be tempted to purchase a new car for their soon-to-be garage or new appliances for their dream kitchen. But once under contract, it’s important to understand that these types of financial decisions can impact your credit history, which is a key component of the mortgage process.
Lenders “recheck credit right before closing, and if a major purchase has been made, that can compromise all of your debt information,” says Sandra O’Connor, regional vice president of the National Association of Realtors.
If you take on more debt before closing, your debt-to-income ratio will need to be re-evaluated. In other words, it’s best to wait on that new car until after the closing process is complete.
5. A cloudy title
You’re entitled to a title free of liens, so it’s important to ensure the seller acts ahead of time to clear any that might be outstanding.
The best way to avoid a last-minute surprise? “Ask questions,” Kreger says. “Ask if there are any liens, and if they can be released by the time of closing.”
A title search done before closing can also help disclose any liens, O’Connor says. Sometimes alarm systems, major appliances and fuel storage tanks are long-term purchases that could include a lien on the property.
6. Final walk-through discoveries
A new home is an investment, so be sure to verify the one you move into is in the same condition as when you agreed to buy it, less normal wear and tear.
From noticing that the seller stopped caring for the lawn to discovering a missing refrigerator, last-minute findings can result in your closing being rescheduled. But with adequate preparation, you can help prevent a delay.
“Have your first inspection at the outset of the contract,” O’Connor says. “Negotiate repairs, specify they be done by licensed individuals and request receipts.”
If there are major repairs that require specialists, consider scheduling a second inspection a week before closing to verify the repairs were properly completed. Another inspection costs money, but identifying issues before you reach the closing table can pay off in the long run.
While the closing process can bring unforeseen delays, preparation can help minimize them. By keeping these pitfalls on your radar, you can be proactive and enjoy your new home sooner.
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