You’re all ready to move into your new Mason Flats townhome! The boxes are packed and the movers are scheduled. But the deal isn’t done until the paperwork is signed, sealed and delivered at closing. If closing cannot be completed on the scheduled day, everything could be put on hold. And that would throw a serious wrench into your (and everyone else’s) busy life.
While you can’t foresee every possible snag, you can make sure you have everything you need, including:
- Photo identification. Your signature will need to be notarized on various title and loan documents (if you’re taking out a loan), so you’ll have to prove your identity. Take your state or government issued photo identification (i.e. driver’s license, passport) even if your purchase is to be made solely with cash.
- Separation agreement or divorce order. If you are separated or in the midst of a divorce, a separation agreement or an order from the divorce court could affect your purchase in some states. Ask your attorney or the escrow company for details.
- Funds. Your attorney or escrow company will calculate the amount of money you need to bring to the closing. Include a small overage as a cushion to cover unanticipated closing costs. All but minimum amounts should normally be wired to the escrow company. Do not expect to bring a check, even a certified check, to the closing without confirming that the escrow company will accept it. Also, request the wire from your bank a day or two prior to the closing if you can, and give your bank the date the funds must be received—usually the closing date. Some attorneys and escrow companies ask that the buyer have the funds delivered the day before the closing to avoid delays, particularly if closing is scheduled the day before a weekend or bank holiday.
- Documentary or transfer stamps. Some states, counties, and municipalities impose a transfer tax, which is satisfied through the purchase of stamps to be attached to the property deed (the document that transfers the property from seller to buyer). Often, at least one or more of these stamps are your responsibility to purchase prior to the closing. Ask your attorney, the escrow company, or the state, county, and municipal officials where the property is located whether you must purchase such stamps, and if there are conditions that must be met prior to purchase.
In addition to the above, if you are taking out a loan to finance your home purchase, you’ll be responsible for other items. Your lender will provide you with a loan commitment that describes the terms of your loan, and in most cases includes a list of items needed for the closing. Read this list carefully. It may include the following:
- Homeowners’ insurance certificate and paid receipts. All lenders will require you to furnish the certificate for your homeowners’ insurance, in the amount necessary to cover the replacement cost of the home or the amount of the loan, and showing the lender as an additional loss payee. You’ll also need to show that you’ve paid the first premium. Lenders are particular about how they are named in the insurance policy, so ask yours to give you the exact language, and furnish it to your insurer. Make sure the insurance commences on the closing date.
- Wind insurance. Your lender might require a wind rider to your homeowners’ insurance if your home is located where there is tornado or hurricane activity.
- Flood insurance. The lender will require flood insurance for homes within a national flood hazard area. You might want to look into buying flood insurance even if not required by the lender, as described in Hurricanes and Flood Insurance: What Homeowners Should Know.
- Pest inspection. Some loans require a wood-destroying pest inspection. The rules for VA and FHA loans are sometimes less restrictive, so ask your FHA or VA lender what inspections will be required for the particular home.
- Septic letter and/or well letter. If the home you are purchasing does not connect to municipal water and/or sewers, you might need a septic letter from the local health department. If buying with a VA or FHA loan, the letter might need to contain some specific language, which will be available from the lender.
- Judgment or lien release. If you have a judgment against you from a prior lawsuit or debt, you might have to bring a written, signed, and notarized release to the closing. Your attorney or escrow company can help you obtain this.
- Documentary stamps. Some states require the buyer to purchase stamps similar to documentary or transfer stamps (described above) for the mortgage.
If you are unsure whether you have all these items, or need them, talk to your agent, attorney, or title or escrow company. A last-minute check on whether you’ve got everything you need for closing day can help make things go smoothly.