Final Review Before Setting the Closing Date

As closing nears, there may be apprehension for both buyer and seller. Buyers may have second thoughts about borrowing a large amount of money. Buyers and sellers may get nervous about something going wrong that will interfere with the sale.

The signed sales contract and the signed loan commitment letter obligate both you and the seller to complete the transaction. In fact, if you fail to follow through with the closing, you will lose your deposit and be at risk of a lawsuit.

You are ready to close on your house, and it is time to review all of the work and preparation that has been done. A good way to do this is to look over the "Checklist" and "Question" sections at the end of Chapters One through Four, to be sure that nothing was overlooked. The following list is a reminder of the critical activities that must be finalized:

• secure funds for down payment and closing costs;
• obtain probate approvals (if necessary);
• obtain written estimates for repairs;
• develop a plan for long-term personal assistance;
• develop a plan for long-term maintenance; and
• arrange for assistance with ongoing transportation needs.

Well in advance of the closing date, ask your planning team members to help you recheck the steps leading up to your home purchase. In addition to the critical activities list above, review all of your action plans to ensure that all of your obstacles have been overcome and that you have taken advantage of all of your opportunities.

This is a good time to start thinking about who will accompany you to the closing meeting. Consider the individual(s) that will be in the best position to offer assistance to you on that day.

Before the date for closing is set, there is a considerable number of tasks to complete. Each of these tasks is described.

Depending on where you live, your closing may be conducted by a lender, a title insurance company, an escrow company, a real estate broker, or an attorney for the buyer or seller. If you are in a position to compare and shop for a settlement agent, you might save some money. Most lenders have a list of approved settlement agents in your area. The "Settlement Costs Worksheet" (Worksheet 5) can help with this. It lists all of the various expenses that must be paid to a settlement agent, and which of these expenses are paid by the buyer or by the seller.

A title search on the property must be completed before the closing. It is customary for the buyer to pay for the title search.

A title is a legal document that proves a person’s ownership of a property. The lender will require a title search to make sure that the seller is actually the owner of the property. The title search will also uncover any liens against the property. A lien is a legal claim filed against the property by creditors trying to collect unpaid bills, or by the Internal Revenue Service for nonpayment of taxes. A claim gives creditors the right to collect the money owed them if, and when, the owner sells the property. All liens must be paid off before the property may be sold.

In order to be protected against problems with the title, the lender will require that title insurance be purchased. There are two types of policies:

• a lender's policy and
• an owner's policy.

The lender's policy protects the lender in case a problem with the title is discovered after the property has been bought. The owner's policy protects you. There is a one-time fee for title insurance and you will probably be required to pay the cost for both policies. The lender’s policy is required, but the owner’s policy may be optional. It is recommended that you purchase an owner’s policy in case there are problems with the title in the future. Securing a combined lender's and owner's policy may be less expensive and save you some money. On occasion, the company that previously insured the title may give you a price break by offering you the same policy.

Be sure you clearly understand all of the conditions of the loan approval that were included in the lender's commitment letter. If you have questions about the letter, call your lender to discuss them. If the house you are buying is in violation of a building code or zoning regulation, the commitment letter may specify that those problems must be taken care of prior to the closing. If the seller has agreed to make repairs required by the lender, you will want to see that the work is completed (and done correctly) before closing. Don’t hesitate to ask the real estate agent to arrange a walk through of the property for you just before the closing.

A survey is a drawing or map that shows the exact legal boundaries of the property. It also shows any physical features, such as improvements to the property. The lender may request a survey prior to closing to verify that the property's boundaries are as described in the purchase and sale agreement. The charge for this service is normally paid by the buyer. For example, the survey, or plot plan, may show that a neighbor's fence extends beyond a boundary line of the property you plan to buy (or vice versa). Once in awhile, more serious violations are uncovered and they must be cleared up. If the property was recently surveyed, ask the person who did the job to update the survey. An update will involve less work and may save you some money.

In some areas of the country, homes must be inspected for termites or other insects before they can be sold. Even if this is not a requirement, it is a good idea to obtain such an inspection. Usually, the seller pays for this. You will want a certificate from a termite inspection firm stating that the property is free of both visible termite infestation and termite damage.

As discussed previously, you must be prepared for the costs of repairs and upkeep on your home. The most common way to set aside money for maintenance is to establish an escrow account. If you risk losing public benefits from accumulating too much money, a trust or escrow account may be established to protect these funds. If you receive assistance from an agency and it manages funds allocated for you, the agency may agree to set aside a certain amount of money to be used for home maintenance. Money from the agency, your funds, or other sources may also be deposited into this account on a monthly basis to cover the costs of ongoing maintenance.

If you have a guardian, you will have secured the necessary probate court approval to purchase a home. In some states, a probate judge will have to sign papers that become part of the closing documents. These papers need to be obtained well in advance of the closing date. As discussed in Chapter Four, your guardian needs to consult with an attorney in your area and the probate court that oversees the guardianship to determine exactly what is required to enable you to purchase a home. For further assistance, contact the Protection and Advocacy Agency in your state. The number may be obtained by contacting Fannie Mae’s HomePath Services at 1-800-7FANNIE.

If you have a representative payee who manages your Social Security benefit payments, you must ensure that he or she has provided the lender with copies of accounting reports submitted to the Social Security Administration for the previous two years.

If you receive services and/or funding from an agency, your home may need to be approved by a certification agency within your state. When money from sources such as Medicaid is spent on your behalf, the agency that manages these funds needs to be sure that the money is being used in your best interest. Each state has different requirements for certification. Check with the agency where you receive funds or assistance to learn about the requirements in your area.

If an agency will be providing funds or other assistance, it is necessary to get a commitment in writing. It is very important to do this prior to your closing, as you will need to give these letters to your lender prior to, or at the closing. Commitment letters need to spell out exactly how much money will be allocated on your behalf, how much assistance will be provided, and for what length of time. For example, if an agency establishes an account for your long-term maintenance, the letter needs to state how much money will be set aside each month, who will manage the account, and how the funds can be accessed.

The lender may require that you demonstrate that you have enough money set aside to cover your mortgage payment for one or two months. This reserve, similar to the escrow accounts, is a guarantee for the lender that if you have a lapse in income for any reason, you will be able to pay your mortgage until you can make other financial arrangements.

By now, you should have a solid plan in place that describes how you will receive the assistance you need in your new home. It is essential to have a back-up plan to cover emergency or unusual circumstances. There may be occasions when a support person is unavailable, you are ill and need extra support, or you are unable to stay in your home, for example, if repairs are being done. Having a detailed plan in place prior to the closing will ensure your safety in your new home.