Buying a house

Buying a house

Tools and resources for homebuyers
Whether you're considering buying a home or nearing the closing stage, we assist you in managing the process effectively.

Before you make an offer on a home

1. Getting ready to shop

Uncertain about where to begin, your affordability, or the home buying and financing process? Lay the groundwork for success with some preparation.

STEP 1

Getting ready to shop for your mortgage
While buying a home is thrilling, selecting the right mortgage to finance your new home is equally crucial. Take your time and don't rush into it.

Action steps:

Before diving into home and mortgage shopping, ensure your success by dedicating time to preparation. Utilize our comprehensive guide to review your credit, evaluate your finances, establish your home-price budget, and more.

Get your finances in order

To kickstart your journey to homeownership, you should:

Check you credit 

What to know:

Checking your own credit won’t impact your credit scores:

When you review your own credit reports or scores, it's handled differently than when a lender does it. This means checking your own credit won’t affect your scores.

Mortgage rates can vary based on your credit scores:

While your credit scores are just one aspect of a lender's decision, they play a significant role. Typically:
- Borrowers with scores in the mid- to high-700s or above receive the lowest rates and have more options.
- Those with scores in the 680-740 range may encounter slightly higher rates.
- Borrowers with scores in the 620 to 680 range often face higher rates and fewer options, but certain government programs like FHA, VA, and USDA loans may still be viable.
- Scores below 620 may struggle to qualify for loans and might benefit from improving their credit first.

Beware of credit repair companies:

Exercise caution with companies promising quick fixes to your credit. Especially avoid those charging upfront fees, as they often turn out to be scams. Never pay in advance.

Assess your spending

What to do now:

Here's a simplified breakdown:

1. Assess your spending:

Review your credit card, debit card, and bank statements from recent months to tally up your monthly expenses. Active duty servicemembers can seek assistance from their installation’s personal finance manager for guidance.

Tips:

Remember to include cash purchases by retaining receipts.
- Consider utilizing a personal financial management tool or app, available through your bank or credit union, to monitor spending.

2. Compile a detailed monthly list:

Categorize your expenses for each month and input them into a budgeting tool.

Tips:

Scrutinize several months' worth of statements to capture infrequent expenses like insurance, medical costs, education-related expenses, support for dependents, seasonal expenditures, gifts, charitable donations, and vacations.
- Avoid altering your spending to match perceived norms or ideals.

3. Analyze your finances:

Calculate the total of all categories and compare your monthly spending against your take-home pay.

Questions to consider:

How much surplus remains each month?
- What portion of your budget is allocated to housing-related costs?

If discrepancies arise between your actual and budgeted expenses, reassess your spending patterns to determine if adjustments are necessary.

2. Explore loan choices

Once you've established your priorities and budget, it's time to dive into your home search in earnest. Additionally, begin exploring loan options and scheduling meetings with lenders.

STEP 2

Researching your loan options
Don’t postpone considering how to finance your home until you've found one. Begin exploring your mortgage options now to ensure preparedness when the perfect home presents itself.

Action steps:

Follow these guidelines to schedule meetings with lenders, inquire about various mortgage options, and determine the most suitable one for your needs. Obtaining a preapproval letter demonstrates your commitment to sellers without binding you to a specific lender. In the subsequent phase, you'll assess offers from different lenders and select the most favorable one. It's crucial to shop for a mortgage in advance because once a seller accepts your offer on a home, you may have only a few days to secure financing.

Understand loan expenses:

Selecting a loan extends beyond considering the interest rate or monthly payment. There are numerous expenses linked to obtaining a mortgage.

Invest effort initially to acquaint yourself with mortgage expenses and the available payment options. This ensures you're thoroughly prepared to make the best decision for your circumstances when the moment arrives.

What to do:

Take the time upfront to research and understand mortgage costs.
- Explore your options for paying these costs.

What to know:

Choosing a loan involves more than just considering the interest rate or monthly payment.
- There are various expenses associated with getting a mortgage.
- Being well-prepared with knowledge about mortgage costs empowers you to make informed decisions.

Sometimes, the seller covers some or all of your closing costs, but it's essential to recognize that these costs aren't truly free. Negotiations for the seller to cover closing costs should occur directly with the seller, not the lender. Depending on your local market conditions, sellers may vary in their willingness to cover these expenses. Typically, sellers might agree to cover closing costs if:

1. You agree to a higher purchase price for the home:

Sellers often require a higher purchase price if they're covering the buyer's closing costs. For instance, a seller might agree to sell a home for $200,000 and contribute $4,000 to your closing costs. However, if you didn't request the seller's contribution, they might have accepted only $196,000 for the home. In essence, you're still paying the $4,000, but it's part of your loan instead of listed as closing costs. It's essential to note that in such cases, the home may not appraise for $200,000, which could pose issues for your loan approval.

2. The home requires repairs:

If your home inspection reveals significant repairs, the seller might opt to cover your closing costs instead of addressing the repairs or reducing the sales price. While this reduces your upfront expenses, it doesn't diminish your overall costs since you'll still need to fund the repairs after closing.

Understand the different kinds of loans available:

All home loans are not created equal. Understanding which type of loan aligns best with your circumstances equips you to engage with lenders effectively and secure the optimal deal.

1. Loan Type:

Distinguish between conventional, government, or specialized programs
Mortgage loans are categorized based on their size and whether they are part of a government initiative.

This decision influences:

- The required down payment
- The total loan cost, including interest and mortgage insurance
- The borrowing capacity and potential house price range

What to Consider:

Selecting the appropriate loan option
Each loan type serves distinct purposes. Sometimes, only one type aligns with your needs. If multiple options suit your situation, explore various scenarios and request quotes from lenders to determine which type offers the most favorable terms overall.

CONVENTIONAL

Most common type
- Typically less expensive than FHA loans but may have stricter eligibility criteria

GOVERNMENT

FHA: Requires low down payment, accessible to individuals with lower credit scores
- VA: Reserved for veterans, servicemembers, or surviving spouses
- USDA: Intended for low- to moderate-income borrowers in rural areas

SPECIAL PROGRAMS

State or Local Housing Agencies: Available to low- to moderate-income borrowers, first-time homebuyers, or public service employees
- Special Purpose Credit Programs: Offered by private lenders for low- to moderate-income borrowers, often in targeted communities.

2. Loan Term

Choose between 30 years, 15 years, or alternative terms
The loan term refers to the duration over which you repay the loan.

Compare you loan term options:
Short term (15 year)
Higher monthly payments
Typically lower interest rates
Lower total cost

Long term (30 year)
Lower monthly payments
Typically higher interest rates
Higher total cost

This decision influences:

- Your monthly principal and interest payment
- Your interest rate
- The total interest paid throughout the loan's lifespan

What to Consider:

Opting for shorter loan terms typically results in overall savings but entails higher monthly payments.

There are two primary reasons why shorter terms can be cost-effective:

- You borrow money and accrue interest for a shorter period
- The interest rate is often lower, sometimes by up to a full percentage point

However, the actual savings and potential increase in monthly payments depend on various factors, including the specific loan terms and interest rate. Interest rates can vary significantly among lenders, particularly for shorter terms. Compare rates across different loan durations to assess if you're securing a favorable deal. Always review official loan proposals, known as Loan Estimates, before finalizing your decision.

3. Interest Rate Type

Choose between Fixed Rate or Adjustable Rate
Interest rates for mortgages are categorized into two main types: fixed and adjustable.

This decision influences:

- The potential for your interest rate to change
- Whether your monthly principal and interest payment remains constant and its amount
- The total interest accumulated throughout the loan's duration

Compare Interest Rate Options:

Fixed Rate

Lower risk, no surprises
Higher interest rate
Rate does not change
Monthly principal and interest payments stay the same
2008–2022: Chosen by 85-95% of buyers
Historically: Chosen by 70-75% of buyers

Adjustable rate (ARM)

Higher risk, uncertainty
Lower interest rate to start
After initial fixed period, rate can increase or decrease based on the market
Monthly principal and interest payments can increase or decrease over time
2008–2022: Chosen by 5-15% of buyers
Historically: Chosen by 25-30% of buyers

What to Consider:

Evaluate carefully which interest rate type aligns with your circumstances. Compare the characteristics of fixed-rate and adjustable-rate mortgage loans.

Fixed-Rate Mortgages:

Most borrowers opt for fixed-rate mortgages. With this option, your monthly payments are typically stable, offering certainty regarding your loan expenses over the long term. Your interest rate and monthly principal and interest payment remain constant. However, your total monthly payment can still fluctuate based on factors such as property taxes, homeowner’s insurance, or mortgage insurance adjustments.

Adjustable-Rate Mortgages (ARMs):

ARMS usually consist of two periods. Initially, your interest rate is fixed and remains unchanged. Subsequently, during the second period, your rate adjusts periodically in response to market fluctuations. Consequently, your monthly principal and interest payment may experience significant fluctuations, potentially doubling in some cases. Review how adjustable rates vary and explore ARM rate caps, which limit rate adjustments. ARMs offer less predictability but could be more cost-effective initially. Consider this option if you anticipate relocating before the initial fixed period ends. However, if your stay in the house extends longer than expected, you might face substantial payment increases. Refer to our Consumer Handbook on Adjustable-Rate Mortgages for comprehensive insights.

Compare rates for different interest rate types to assess how ARM initial rates compare to those of fixed-rate mortgages.

LOANS ARE REGULATED BY GOVERNMENT

Typically, lenders must verify your income, employment, assets, debts, and credit history to ascertain your loan repayment capability. Loans that fulfill specific criteria are termed “qualified mortgages,” while those that do not may be labeled as “nonqualified mortgages,” which could entail higher risk or cost. Nonqualified mortgages might be targeted toward self-employed individuals or those without Social Security numbers.

Contact multiple lenders

Contacting multiple lenders is a crucial step in securing the right mortgage for your needs. Here's what you should do:

1. Make a list of potential lenders: Seek recommendations from friends, relatives, or real estate agents, but also explore different lenders on your own. Local banks, credit unions, and online platforms are good places to start. Consider reaching out to a housing counselor for guidance.

2. Meet with lenders or mortgage brokers: Schedule appointments with at least three lenders on your list. During the meeting, share details about your situation and the type of loan you're considering. Ask about interest rates, fees, and monthly payments for different loan options. Also, discuss any potential issues that may affect your eligibility.

3. Keep your options open: Don't commit to a lender right away. Explore your options with different lenders before finalizing your decision. Remember, once you find a house and your offer is accepted, you'll have limited time to secure financing.

What to know:

- Bring documentation: Lenders have specific requirements for income, assets, and down payment sources. Having necessary documents with you helps the loan officer assess your situation accurately.
- Credit check considerations: Lenders may ask permission to check your credit, which could affect your credit score slightly. Within a 45-day window, multiple credit checks won't impact your score further. Discuss with your loan officer about the timing of credit checks and potential unsolicited offers you may receive.
- Explore all options: Even if a real estate agent or homebuilder recommends a lender, it's essential to shop around for better deals. Don't hesitate to seek the most favorable terms for your mortgage.

Gather and update your paperwork

Updating your paperwork is a crucial step in the homebuying process. Here's what you should do:

1. Update your application packet: Ensure you have all the necessary documents up to date. Gather recent copies of important paperwork like pay stubs and bank statements. Consult with the lenders you've been in contact with to determine any additional documents needed based on your situation.

2. Apply for a "Certificate of Eligibility" (COE) if you're a servicemember or veteran interested in a VA loan. The COE is necessary to qualify for the loan.

What to know:

- Gather everything anyway: Even if a lender doesn't currently require a specific document, having all your paperwork organized can streamline the process later on.
- Proof of child support or alimony: If you receive these payments and want them considered as income, ensure you have proper documentation, such as a court order and payment records.
- Self-employed or irregular income: If you fall into these categories, be prepared to provide extensive documentation of your income. Requirements may vary among lenders, so consult with them for specific guidance.

Get a preapproval letter

A preapproval letter is a statement from a lender indicating their tentative willingness to lend you money up to a certain loan amount.

Though it's not a guaranteed loan offer, a preapproval letter signals to sellers that you're likely to secure financing. In many cases, sellers require a preapproval letter before accepting an offer on a house.

What to do now:

1. Decide when to get preapproval: Lenders typically check your credit before issuing a preapproval letter, and it may have an expiration date (usually 30 to 60 days). Some wait until they're ready to seriously shop for a home, while others get preapproved early to spot potential issues.
2. Understand the lender's preapproval process: Each lender has different requirements and documentation requests.
3. Request preapproval: Provide the necessary information and follow up with the lender.
4. Ask questions: Inquire about the assumptions made for the preapproval and any factors that could impact your loan later.

What to know:

- Differences between prequalification and preapproval: Some lenders offer prequalification, while others provide preapproval. For simplicity, we refer to both as preapproval.
- Varying information and documentation requirements: Lenders may base preapproval solely on your provided information or delve into details with you upfront.
- Preapproval isn't a loan application: It indicates willingness to lend, pending further confirmation. It helps in home shopping but doesn't commit you to a lender.
- No need to choose a lender yet: Wait until you've made an offer on a house and received Loan Estimates from potential lenders to decide.

How to avoid pitfalls:

- Determine your affordability: You decide how much you can comfortably afford for a home, considering upfront and monthly costs.
- Adjust expectations if needed: If preapproval is less than planned spending, discuss factors with the lender and adjust home price expectations if necessary.
- Communicate with your real estate agent: Be clear about your budget to avoid viewing homes beyond your price range.

Choose the right loan for your needs

Once you've found the perfect home, the process accelerates. With numerous tradeoffs and decisions involved in selecting a mortgage, it's wise to consider them beforehand.

Here's what to do:

1. Decide on the loan type: Revisit the section on understanding different loan types if you're uncertain.
2. Consider points or credits: Evaluate whether you prefer points, credits, or neither and how they affect your costs.
3. Request multiple loan options from each lender: Compare them side by side to determine the best deal for you.

Here's what to keep in mind:

- Know your loan preference before requesting Loan Estimates to ensure consistency.
- Factor in the duration you plan to keep the loan when comparing options, considering the shortest and longest timeframes.
- Understand that the options discussed with lenders are not firm offers but can help you narrow down your choices.

How to avoid potential pitfalls:

- Look beyond the monthly payment and consider the overall cost and potential risks associated with the loan type.
- Don't rely solely on the possibility of refinancing in the future, as it's not guaranteed and depends on various factors like changes in income and home value.

Find Your Ideal Home

While you're exploring your loan options, you can simultaneously search for your dream home. After learning about loan choices, meeting with lenders, obtaining a preapproval letter, and finalizing your loan type, the focus shifts to finding the perfect property.

Here's what you should do next:

Remember your budget and priorities:

- Stay mindful of your budget as you search for homes. Avoid falling for properties that exceed your financial limits.
- Continuously assess your total monthly payments, interest rate expectations, down payment, and closing costs to align with your budget and financial goals.
- Evaluate the disaster risk and availability of home insurance for your target property, considering factors like building codes and energy efficiency.

Consider working with a real estate agent:

Select an agent with expertise in your preferred neighborhoods, price range, and property type. Real estate websites can also be helpful in finding a suitable agent.
- Ensure your chosen agent is reputable and transparent about their representation and compensation.
- Understand who your agent represents, whether it's the buyer, seller, or both, and how this may affect your home-buying process.

Research and contact closing service providers:

Start exploring providers for closing services such as title insurance and settlement agents. Choosing your own providers can often result in cost savings.
- Independent settlement agents, like attorneys, may offer lower costs and unbiased advice. Research these options to make informed decisions.

What to keep in mind:

Plan for contingencies by making your purchase offer contingent on obtaining financing and a satisfactory inspection.
- When considering a new construction home, inquire about upfront builder deposits and your right to shop around for a mortgage lender.

How to avoid potential pitfalls:

Obtain an informal insurance estimate before committing to a property, especially in high-risk areas, to anticipate potential insurance challenges or unexpected costs.
- Inquire about past property damage or flooding, as frequent incidents could impact insurance costs and property value.

Step 3

3. Selecting a Mortgage Offer

After your home offer gets accepted, the focus shifts to choosing a mortgage loan and a lender.

With a particular home in sight, it's time to compare specific loan offers. This involves requesting, reviewing, and comparing Loan Estimates from various lenders to identify the best fit for your needs. This phase of the process can progress rapidly.

A Loan Estimate is a standardized document providing crucial details about your loan offer. During this stage, you'll learn what factors to consider when evaluating offers and how to engage in negotiations.

Request and Evaluate Multiple Loan Estimates

Maximize Savings by Exploring Options

Once you've pinpointed your desired home, it's time to seek Loan Estimates from multiple lenders. Soliciting quotes from various lenders can not only save you money but also help secure a mortgage that aligns with your requirements. Homebuyers can potentially save $600 to $1,200 annually by obtaining mortgage offers from multiple sources.

What to Do Now

1. Request Multiple Loan Estimates:

- Contact the lenders you're considering and express your readiness to request a Loan Estimate.
   - Furnish the lenders with six key pieces of information to facilitate the Loan Estimate:
     - Your name
     - Your income
     - Your Social Security number
     - The address of the intended home purchase
     - An estimated property value
     - The loan amount
   - Ensure the lenders are aware of any unique aspects of your situation, such as self-employment or irregular income sources.
   - Each lender must furnish you with a Loan Estimate within three business days of your request.
   - Confirm whether your Loan Estimate includes estimates for property taxes and association dues, if applicable.

2. Review Loan Estimates Thoroughly:

- Scrutinize crucial details and refer to our interactive guide to ensure accuracy.
   - Verify if your interest rate is locked, as this can affect your mortgage terms.
   - Be vigilant for risky features listed under Loan Terms, such as potential increases in loan amount or monthly payments.
   - Promptly rectify any errors on your Loan Estimate to prevent discrepancies in rates and costs.
   - Consider seeking assistance from a housing counselor for comprehensive review.

What to Know

- Obtaining multiple Loan Estimates does not harm your credit within a 45-day window.
- Receiving a Loan Estimate does not constitute loan approval; it merely outlines the expected terms.
- Loans for certain property types may entail slightly higher costs.

How to Avoid Pitfalls

- Beware of lenders requesting significant upfront fees apart from a credit report fee, as this contravenes regulations.
- Exercise caution if a loan officer proposes a different loan type or features without adequate justification.
- Refrain from signing forms with blank spaces, ensuring all information is accurately filled in.

Compare and Negotiate Loan Offers

Analyzing Loan Estimates empowers you to determine which lender presents the most favorable terms for the loan type and amount you've selected.

Once armed with multiple Loan Estimates, engage in negotiation with lenders to secure the most advantageous deal. Use your competitive offers as leverage, and don't hesitate to inquire about discrepancies between estimates or request adjustments to match your ideal scenario.

What to Know:

Focus on comparing numbers within the lender's control to make an informed decision.
- Be cautious of "no closing cost" loans, as they often entail higher monthly payments.

How to Avoid Pitfalls:

Stay vigilant for discrepancies between discussed terms and those outlined in the Loan Estimate.
- Ask questions if anything seems unclear or significantly differs from your expectations.

Selecting a Loan Offer

Having compared and negotiated your offers, it's time to make a decision and inform the chosen lender.

What to Do Now:

1. Contact the selected lender to confirm your decision and express your readiness to proceed with your application. If multiple Loan Estimates were provided, specify the preferred loan option and ensure clarity on key terms with the loan officer.

2. Consider locking your interest rate to safeguard against potential rate increases before closing. Verify the status of your rate lock on the Loan Estimate and its expiration date.

3. Begin gathering and updating your documentation in preparation for the next phase, where you'll submit income, asset, and employment verification to your lender.

What to Know:

- Loan Estimates have expiration dates. Failure to indicate your intent to proceed within 10 business days may result in the lender closing your application as incomplete.

- Receiving a Loan Estimate does not bind you to a lender. You're only committed upon signing the final closing documents. However, switching lenders may necessitate restarting the loan process.

- Be prepared to pay loan application or appraisal fees upon expressing your intent to proceed. These fees may or may not be refundable if you opt not to proceed with the loan.

How to Avoid Pitfalls:

- Ensure the feasibility of closing before your rate lock expires to avoid potential extension fees. Inquire about options for extending or modifying the rate lock if necessary.

4. Closing on your new home

After your purchase offer gets accepted by the seller and you've settled on a loan and lender, it's crucial to shift your attention to the closing process.

Prepare to furnish your lender with supplementary documents, remaining vigilant for any requests or updates. Additionally, arrange for a home inspection and explore options for homeowner's and title insurance. Stay vigilant against potential mortgage closing scams.

Submit documents and respond to lender requests promptly to keep the loan process moving smoothly.

Here's what you need to do:

1. Gather your documents: Use a checklist to ensure you have all the necessary paperwork ready. Consult with your loan officer to identify any additional documents required based on your situation.

2. Submit your documents: Follow your loan officer's instructions on how and where to submit your information. Ensure you submit copies and retain the originals for your records. Confirm receipt with the designated contact person.

3. Stay proactive and responsive: Keep your loan officer updated with your current contact details. Regularly check your email, voicemail, and postal mail for any requests or updates. Respond promptly to requests for additional documents to avoid delays.

Things to keep in mind:

- Expect to interact with various personnel from your lender, each handling different aspects of your loan application.
- If you receive income from non-employment sources or large deposits in your bank account, be prepared to provide additional documentation.
- Some lenders may utilize technology to streamline document collection processes, ensuring accuracy and efficiency.
- Cash payments at closing typically need to be in the form of a cashier's check or wire transfer; verify the payment method with your closing agent.

Tips to avoid common pitfalls:

- Ensure all documents submitted are complete, including every page of multi-page documents.
- Double-check the inclusion of full website addresses (URLs) on printed online documents.
- Verify if your chosen loan permits the use of gift funds for the down payment, as some loan types may have restrictions.

Schedule a home inspection

Arrange for a home inspection promptly after selecting a property to ensure ample time for addressing any issues that may arise.

Here's what you need to do:

1. Find a reputable home inspector: Opt for an inspector known for their integrity and thoroughness in evaluating the property's physical condition. You want someone who will provide an honest and comprehensive assessment.

2. Schedule an independent inspection without delay: Book an inspection appointment as soon as possible to uncover any significant issues with the property. Early detection allows you to assess whether you still wish to proceed with the purchase and provides time for additional inspections if necessary.

3. Prioritize an independent inspector: Choose an inspector who works directly for you and is not influenced by other parties involved in the transaction. This ensures impartiality and a thorough examination of the property.

Key considerations:

- Understand the distinction between a home inspection and an appraisal, as both are typically required when securing a mortgage.
- Negotiate with the seller or consider canceling the sale based on inspection findings, especially if major repairs are needed.
- Attend the inspection whenever feasible to gain insights, ask questions, and better understand the inspection report.

Avoid common pitfalls:

- Never forego a home inspection, as it serves as crucial protection for buyers.
- Address any serious flaws uncovered during the inspection before finalizing the purchase agreement.
- Research and vet potential home inspectors by checking references and verifying their credentials with relevant authorities.

Shop for homeowner's insurance

Browse for homeowner's insurance to safeguard your property against unexpected damage.

Here's what you should do:

1. Obtain quotes from multiple insurance providers: Reach out to several companies and request written quotes. Compare the costs and coverage options offered by each, and consider how adjusting the deductible affects your premium.

2. Share quotes with your loan officer: Present the quotes you're considering to your loan officer and confirm if they meet the lender's insurance coverage requirements.

3. Select an insurance company and policy: Once you've decided on a provider and policy, inform your loan officer by providing the necessary details.

Additionally:

- Assess the need for flood insurance: Understand that standard homeowner's insurance typically excludes flood damage, so evaluate whether you require a separate flood insurance policy, especially if the property is at risk. Explore flood insurance options and potential disaster risks to make an informed decision.

Key considerations:

- Factors influencing homeowner's insurance costs include coverage amount, location-related risks, property characteristics, deductible amount, and previous claims history.
- If purchasing a condo or co-op, understand that while master insurance usually covers common areas, you'll need individual insurance for your unit.

Seek out title insurance and other closing services to manage your closing costs effectively.

Here's a step-by-step guide:

1. Identify services you can shop for: Refer to section C on page 2 of your Loan Estimate to pinpoint the services you can shop around for. This varies depending on the lender.

2. Find potential service providers: Your lender must provide a list of local companies offering the services you can shop for. You can choose from this list or opt for other providers with your lender's approval.

3. Contact closing service providers: Reach out to these providers for price quotes and references from recent clients. Contact the references to gauge responsiveness and problem-solving abilities.

4. Consider owner’s title insurance: While lender’s title insurance is mandatory for most lenders, consider purchasing owner’s title insurance to safeguard your financial investment in the property.

5. Select and inform your chosen providers: Choose providers with competitive pricing and a solid reputation. Notify your lender once you've made your selections.

6. Schedule your closing: When setting a date, consider contractual deadlines, moving-out dates, rate-lock expiration, and your lender's approval timeline. Aim to schedule your closing for less hectic times to ensure smoother proceedings.

Key considerations:

- The individual overseeing your closing varies by state, from settlement agents to escrow agents or closing attorneys.
- Your lender may have preferred providers, but don't assume they offer the best deals. Shopping around can lead to significant savings.
- Closing service costs, though seemingly minor compared to the home's price, can accumulate. Research suggests savings of up to $500 on title services alone through shopping around.
- State laws may necessitate different disclosures for title insurance, which should align with the total costs on your Loan Estimate or Closing Disclosure.

Ensure thorough research and comparison to make informed decisions and optimize your closing expenses.

Look out for revised Loan Estimates

Be vigilant for updated Loan Estimates from your lender as they validate your loan application details. These revisions signal significant changes to the loan terms and associated expenses.

Here's what to do next:

1. Stay attentive to lender communications: Regularly check your email and physical mail to ensure you don't overlook any revised Loan Estimates or other crucial messages from your lender.

2. Compare revised Loan Estimates: Analyze the differences between the updated estimate and the previous one. If you're uncertain about the alterations or their implications, promptly consult your loan officer. Inquire about the reasons behind the changes and how they affect various aspects of the loan, such as the loan amount, interest rate, monthly payments, and closing costs.

Key considerations:

- Reasons for revised Loan Estimates may include discrepancies between the appraised value and sales price, difficulties in documenting certain types of income, alterations in loan type or down payment, or requests for a rate lock subsequent to the initial estimate issuance.
- It's imperative to recognize that lenders are permitted to modify Loan Estimates solely upon encountering new or different information during the application process.
- If you suspect unwarranted revisions, seek clarification from your lender and, if necessary, escalate the matter by lodging a complaint with the CFPB.
- Familiarize yourself with the circumstances under which costs can be revised and the permissible degree of adjustment.

Review documents before closing

Prepare for closing by reviewing documents in advance to alleviate stress and ensure clarity.

Here's what you should do:

1. Confirm how you'll receive your Closing Disclosure: Reach out to your lender or closing agent well before closing to determine how you'll receive this vital document, which is mandated by law to be provided three business days before closing. Identify whether it will be sent via email, postal mail, or if you need to access it from a website.

2. Retrieve your most recent Loan Estimate: Locate and compare it to your Closing Disclosure to ensure consistency.

3. Request other closing documents ahead of time: Besides the Closing Disclosure, there are other essential documents to review, such as the Promissory Note, Mortgage, and Deed. Ask your lender or closing agent to provide these documents alongside the Closing Disclosure.

4. Utilize resources for guidance: Use interactive tools like sample Closing Disclosure forms and guides to navigate through the documents effectively.

Key points to remember:

- You have a mandatory three-day window to review your Closing Disclosure thoroughly. Make the most of this time to address any queries and ensure comprehension.
- Some closing costs may fluctuate marginally compared to your Loan Estimate, but others are subject to stricter regulations regarding changes.
- Consider hiring a real estate attorney to scrutinize the documents, especially if you're purchasing property jointly or have specific ownership preferences.
- Remain vigilant against mortgage closing scams by verifying the authenticity of all communications and instructions related to fund transfers.

By taking these proactive steps and staying informed, you can streamline the closing process and mitigate potential pitfalls.

Close the deal

Finalize the transaction by closing the deal on your new home. This critical step involves signing legally binding documents that solidify the purchase and financing arrangements.

Here's what you need to do:

1. Use our closing checklist if you haven't already: This comprehensive guide provides step-by-step instructions on what to do before, during, and after the closing process.

2. Conduct a final walk-through of the property: Before signing any papers, ensure that all agreed-upon repairs have been completed, and all items promised by the seller are present in the house. If any discrepancies arise, promptly communicate with the seller to address them.

3. Take your time to review documents: Expect to encounter numerous documents during the closing, mandated by lenders, state, and federal regulations. Exercise your right to thoroughly review each document, verifying that the information aligns with your expectations.

4. Ask questions if anything seems amiss: If you notice discrepancies or are unclear about any aspect of the sale or your loan terms, seek clarification from your real estate agent, settlement agent, or lender. Do not proceed until all concerns are adequately addressed.

Key considerations:

- Last-minute changes may occur before closing, such as unresolved repairs or adjustments to seller credits. Be prepared to adapt to these changes if necessary.
- If significant modifications are made to your loan terms, you'll receive a new Closing Disclosure, affording you three business days to review it before closing.
- Remember, you're not bound to the transaction until you've signed the closing documents. If you're uncomfortable or dissatisfied, you have the option to walk away, albeit with potential financial implications outlined in your purchase contract.

Tips to avoid pitfalls:

- Refrain from signing any documents that deviate from the agreed-upon terms or contain blank spaces.
- If there are substantial disparities between the documents you reviewed beforehand and those presented at closing, withhold your signature until you're fully satisfied with the transaction.

After closing

Congratulations on your new home! Owning a home is a significant financial commitment, so it's essential to keep your documents for future reference.

Here's what you should do:

1. Safeguard your final loan and purchase documents: Store all your closing paperwork in a secure location, whether it's a physical file or an electronic folder. Ensure you have these crucial documents:

   - Closing Disclosure
   - Promissory Note
   - Mortgage (also known as the Security Instrument or Deed of Trust)
   - Deed

2. Preserve your budgeting documents and mortgage-related information: Retaining this information can be beneficial down the line.

3. Be cautious of unsolicited mail: Following the closing of your loan, you may receive a barrage of junk mail. Since your deed and mortgage details become part of the public record, companies may use this information to send advertisements or scams. Exercise caution and don't automatically assume that mail mentioning your lender or mortgage-related details is legitimate.

Key points to remember:

- Your Closing Disclosure can offer financial benefits in the future: It can help you identify tax-deductible closing costs, guide you during refinancing or home-selling processes, and serve as a reference point for future financial decisions.

- Beware of deceptive tactics used by some companies: Some entities may attempt to appear as your lender in correspondence by using your lender's name, including personal details from your mortgage, or employing urgent language. Always scrutinize such communications and verify their legitimacy before taking any action.