Explore Major Purchases
Getting close to your closing? What to know before you go
Step-by-step to inking your new home, sweet home
There's a process for buying a house: save a down payment, find a house you like, agree to buy it for a specific price, secure a mortgage and then bring it all together at closing.
A couple of hours and a few dozen signatures later, and the house of your dreams should be yours. Sometimes, though, there are extra costs or conditions you didn't expect.
That's why it's important to do extra prep before you arrive at your bank or title company to sign the final documents, says Max Koziol, a Chicago-based lending manager for JPMorgan Chase.
"It's OK to be nervous because this is going to be one of the biggest transactions of your life," Koziol says. The median price of a single-family home rose 6.3 percent in the first quarter to $217,600 nationally, according to the National Association of Realtors.
"All you can do is prep well and make sure the team you're working with is trustworthy," he says, referring to real estate agents, lawyers and lenders.
Find a knowledgeable mortgage banker who will stick with you through the entire buying process, Koziol says.
"Interview carefully. After all, you are literally banking on this person," he says. "Is he or she answering your questions quickly and authoritatively, or asking if they can 'get back to you?'
"The more decisive your banker is, the more likely it is she'll able to answer others' questions on your behalf—and get you into the house of your dreams," he says.
It starts with the term sheet
Once they agree on a price, the buyer and seller draw up a term sheet that specifies the conditions of the sale. The more conditions, the more help you'll need.
Outline all the specifics of the deal in writing, Koziol says. For example, you may want a lawyer to help craft language detailing how and when the seller will pay any pre-negotiated closing costs to the bank on your behalf.
Then there's the closing disclosure form
You'll also want a signed copy of the term sheet on hand if the closing disclosure form doesn't reflect the terms you expect. And be sure to review it carefully; federal law requires lenders to give homebuyers three business days to review documents and contest errors.
All financial data should include the terms of the sale and the loan estimate you received when you applied for the mortgage for your new home.
If they don't? "Don't wait if something goes wrong," Koziol says. “Reach out to your mortgage banker immediately, and remember that you shouldn't feel pressured to buy before your questions are answered."
3 keys to unlocking the home of your dreams
Closing day can be nerve-wracking enough, but what if your lawyer asks for extra fees? Or your lender needs more information?
Koziol offers three bits of advice:
1. Stay organized and respond fast. Bring a file with you of all your documents. And leave a complete set of copies at home. If the lawyer or title company introduces last-minute fees, consult your mortgage banker right away. If necessary, ask to delay the closing a day or two. That may cause them to back off.
"Most states allow the closing to be pushed back a few days," Koziol says.
2. Steer clear of big purchases. Avoid the temptation to buy appliances and furniture ready for move in. Or pay cash for them.
That's because your lender will pull another credit report right before closing—and won't like to see a sudden surge of new debt, whether it be from credit card purchases or new installment loans.
3. Keep extra cash handy. Keep a little extra cash in your checking account—maybe $500, Koziol says—to pay last-minute fees you can't negotiate away. And if there are none? You'll have "extra" money to put toward new furnishings.
Tim Beyers is a Denver-based freelance writer whose work has appeared in 5280 Magazine, AOL DailyFinance, Entrepreneur, Fast Company, The Washington Post, Writer's Digest and The Motley Fool, among other outlets.