RESOURCES








CLOSING RESOURCES

1. Pre-closing


Your offer was accepted! Now the work really starts.


Depending on your source of funding, it could take several weeks before you are able to close and you'll have a lot of work to do in the meantime.


The average closing takes 45 days and usually comes between 30-60 days after the offer is accepted.

This period is also referred to as the "due diligence period" because it's during this time that you'll find out more about the property. You'll complete any necessary inspections and work on completing your financing. You’ll be working mostly with the mortgage and title companies during this period and you’ll hear from them often. Respond to their requests as quickly as possible to make your closing smoother and faster!


The biggest determinant in how quickly your loan closes is you. You can speed up the process by quickly responding to calls or email requests from the mortgage company. You’ll hear from them often, so be sure to stay on the ball. The longer you take, the longer it will take to close on your loan and home.



What happens during pre-closing

Mortgage

You will officially apply for the mortgage once the offer on the home is accepted. You already have a mortgage preapproval, but now you can shop around for better mortgage terms.

The application for the mortgage will be much more intensive than the pre-approval. The mortgage underwriter will have to finalize the mortgage application and that means they need to verify your information, request and review more financial documents, and verify that the property meets certain requirements.


Here's what the lender will request from you:
  • A copy of the signed Purchase and Sales Agreement
  • Tax returns and W-2s for at least the last two years
  • Pay stubs from the last 3 months (minimum)
  • Complete bank statements for all financial accounts, including investments (for the last 2 months)
  • Signed personal and business tax returns (all pages and relevant schedules)
  • If self-employed, a copy of most recent quarterly or year-to-date profit/loss statement
  • Bank statements for the last 3 months, minimum. You don’t want anything embarrassing there. Avoid overdrafts – you’ll have to provide a written explanation for each one.
  • If you have unusual sized in or outflows, you will have to explain it.
  • If someone gives you money (like a family member), you will have to fill out a form noting it and getting their signature.
  • Statements on student loans.
  • At least 3 months statements of investment accounts. Note if you will be taking money from these accounts for your home.
    (Note: if you are a first-time home buyer, you can take up to $10,000 from your IRA to use for the down payment without an early withdrawal penalty, though you will have to pay tax on the gains)
  • You’ll have to document the monthly payments of your previous residence. If you were renting, usually you will have to show the copies of ONE YEARS’ worth of rent payments.

Mortgage application document checklist:


Credit Check

The lender has to check your credit and you will pay for this out of pocket.

COST: $15-50


Appraisal or Price Estimate

Lenders will require you to have an appraisal completed on the home since they want to make sure the money they are lending isn't more than what the home is worth. YELLOW has completed a certified appraisal on some homes and it may be accepted by the lender. Homes with only price estimates will be required to have an appraisal.

The appraiser will produce a report that shows the fair market value of the home by comparing it to recently sold homes in the neighborhood. Also, the report will list detailed information about the property and the neighborhood. You will pay for this out of pocket.

COST: $350-450

More on comparable sales (or "comps" in real estate lingo):



Inspection

YELLOW has already completed an inspection report for every home listed with us, but many buyers may choose to do an additional inspection.

All inspections are completed by completely independent inspectors to prevent any conflicts of interest.

The inspection uncovers any potential issues with the home - structural, plumbing, electrical, etc. - that may not be visible when you visited the property.

Nearly every home inspection - even those on new homes - will turn up some issues. Some are minor and can either be ignored or resolved through negotiations. However, some cannot be ignored. You can make a list of issues you’d like addressed by the seller and the seller can negotiate what they’re willing to (and not willing to) fix. If an agreement cannot be reached you can walk away from the property without penalty.

NOTE: If the home is vacant, you’ll need to contact the utility companies (power and water) to get services turned on if you’d like to do an inspection. This is not an uncommon request and the utility companies can assist you with this process.

COST: $300-500



WDO Inspection

A WDO (wood destroying organism) inspection report is separate from the home inspection discussed above. It is done by a pest company where they inspect the home for evidence of an infestation or damage caused by wood destroying organisms. This report is often referred to as a termite inspection.

The WDO is typically requested by the mortgage company when you're applying for the mortgage and with FHA loans. Buyers will have to pay for this out of pocket.

COST: $75-200


Survey

The title company will likely do a property survey to ensure the piece of land you're buying is the accurate dimensions and acreage, and that none of your neighbors have encroached upon your property lines.

COST: $350-450



Title Search

YELLOW has completed a title search for some homes listed with us, but homes without a title search will be required to do so.

The title company will complete a title search on the property to make sure there are no liens against the home and that it can legally be yours.

COST: $75-200



It’s possible to do a title search yourself, but you probably shouldn’t. If you want to do the work on your own, you'll have to go to the county records office. There are websites that can produce a report in within few minutes (Nextace.com or SearchQ.com) where you can download a title report that has mortgage record, ownership history, delinquent taxes even liens and foreclosure information. But this does not carry the same weight as the county report.


Title Insurance

Even if the title company has done their homework, they might have overlooked something important that can come back to haunt you. Having title insurance can potentially help you to avoid a financial nightmare later on.

If you are taking out mortgage, the lender will most likely require you to purchase a lender’s title insurance. It covers the lender up to the amount of the loan in the event that any problems arise with the home’s title after financing.

A separate owner’s policy is issued for the amount you paid for the home. It covers a broad range of problems that may arise. This includes deed errors or omissions, tax liens, fraud, forgery of deed documents, and mistakes in the public record. It also covers you if the heirs of any previous owners make a claim on the property.



Who pays for the title insurance? In Florida it varies, but in most cases the buyer pays lender policy and the seller pays the owner's policy.

COST: Several hundred to several thousand dollars, based on the purchase price of the home. The rate is regulated by the State of Florida and is as follows:

  • $5.75 per thousand for the first $100,000
  • $5.00 per thousand from $100,000 to $1 million
  • $2.50 per thousand from $1 million to $5 million
  • $2.00 per thousand from $5 million to $10 million




Homeowners Insurance

Every lender requires you to have homeowners insurance.

If you already own a home, you can call your insurance agency and let them know you’re buying a new home. They will handle writing a new policy.

If you don’t have an insurance agent, you have a couple options. Some people shop around and contact insurance companies directly to buy a policy. In this case you need to know exactly the coverage that is required.


THE BIGGEST HOME INSURERS
  1. State Farm
  2. Allstate
  3. Liberty Mutual
  4. USAA
  5. Farmers Insurance
Source: Everquote

There are some online upstarts that are making headway:


Most people, however, use a mortgage broker. The broker can shop around and find a policy that fits your needs.

The insurance payment is usually rolled into your monthly mortgage payment. Your lender will open an escrow account and handle the payments to the insurance company. Be aware that you’ll probably make an initial payment for insurance at closing as part of your closing costs.



Flood Insurance

We discussed flood insurance earlier in this guide. It’s possible you found a great home, but it’s located in a flood zone. You’ll have to get insurance for that, too. Unfortunately, insurance to cover this risk is not typically provided in a homeowners policy so it must be purchased separately. The average cost of flood insurance in Florida's largest cities ranges from $350 to $950 per year.

Find out the flood status of a property here:

Flood Map Legend
  • Unshaded
    Zone C and X – Under 0.2% chance in any given year - No flood insurance required
  • Orange Shaded
    Zone B and X – Between 0.2 - 1% chance in any given year - No flood insurance required
  • Blue Shaded
    Zone A, AE, AR, A1-30, A99 - At least a 1% annual chance and 26% chance over a 30-year mortgage - Flood insurance required

To buy flood insurance, you must go through one of the federally regulated companies. According to FEMA, if your insurance agent does not sell flood insurance, you can contact the NFIP Referral Call Center at 1-800-427-4661 to request an agent referral.

Florida program info:


Utilities

Before closing, you will need to set up the utility services at your new home. This includes both power and water at a minimum, but you may also need other services like gas or propane. Services like phone, internet, cable, and security can be scheduled now, but are not needed before closing.

To establish your utilities, it is usually easiest to call the utility company. That way you can find out what they will need from you to turn on their services. Sometimes this can be done over the phone or internet (especially if you are already a customer), but often it requires visiting the utility company – especially for power.



Moving

Though you may not yet know the exact date you will be moving, you need to do the best you can to prepare.

Experts recommend planning for a move 6-8 weeks before actually moving because companies book up quickly.

Budget for moving costs. Even if your move is in-town, moving is expensive and time-consuming. A local move of less than 100 miles with two movers and a moving truck costs, on average, $80 to $100 per hour.


Average LOCAL Moving Costs:
The average moving price for local moves is $25 per hour per mover. However, that price can be higher depending on your location within the country. Therefore,
  • Studio apartment: 2 professional movers working for 3-5 hours at an average of $25 each per hour = $150-$250 for completing the entire moving job.
  • 2-bedroom apartment: 3 local movers working for 5-7 hours at an average of $25 each per hour = $375-$525 to get the job done.
  • 3-bedroom house: 4 professional local movers working for 7-10 hours at an average of $25 each per hour = $700-$1000 to complete the house move.
  • Larger homes: the estimated local moving costs for larger homes (5,000 square feet and up) rise sharply and can reach values around $1500-$2000, and even more.
Source: My Moving Reviews







Have you completed everything above? Great! Now we’re getting closer to the close.

At least three business days before closing, your lender must send you a Closing Disclosure (before October 2015, this was a HUD-1 form. You'll now receive a Loan Estimate and Closing Disclosure.). This form lists all final terms of your loan such as closing costs and the details of who pays and receives money at closing.



Also, a day or two before closing you will want to complete a final walkthrough. Here you will verify that the house has not been damaged and any items you wanted to address were completed. If everything looks fine, it’s time for closing.


Additional Resources:
Can you walk away from a home under contract?







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