Buying your own home is a milestone for many Americans. Owning a home can provide a place to raise your family or your first foray into independent living. Whether you are buying a home on your own or with a partner, the process can be stressful. You have maybe heard horror stories of home sales falling apart at the last minute.
Closing on a home can reveal problems with the property, or issues may occur with paperwork. Below are some common problems that could come up during closing and how to handle these issues.
Home appraisal is low
Part of the home buying process in the U.S. includes getting a home appraisal. An appraiser walks through your potential new home and inspects the condition and value of the property. If a home is appraised lower than what you are offering, the bank will not approve your home loan for the higher amount because if foreclosure occurs, they would not be able to recover their entire investment.
There are a few ways to handle this. You could ask the seller to lower the price. You could bring another home appraiser in, and see if their evaluation supports the purchase price. The other option would be paying the difference in cash.
Title is not clear
During closing, a title company completes a title search on the property. This search will reveal any issues with the title, like a lien on the home, back taxes owed or if there any pending lawsuits involving the property. Often, these title searches are completed a few days before closing. You could ask that the title search is completed earlier in the process, so you have plenty of time to resolve any issues. Your bank will not allow the sale to move forward until problems with the title are addressed.
Missing paperwork needed from you
The lender will ask you for financial information to complete your loan paperwork. Make sure you provide all the documentation requested. Even if you provide everything requested, it may be possible there are other documents the lender forgot to request. Check in with them again before closing to make sure they do not need anything else. Any last-minute requests could slow or halt your closing.
Mistakes on closing documents
According to Zillow, one of the most likely closing issues is errors in paperwork. The law requires the home buyer is provided with the loan estimate and closing disclosure forms three days before the actual closing. Review these documents carefully, and make sure names, addresses, interest rates and the sale price are listed correctly. Mistakes mean new paperwork will need to be created.
Down payment from bank late
When buying a home, most often the bank finances a loan, and the seller supplies a down payment. A down payment not only lowers the price of your mortgage, it also demonstrates to the bank that you will continue to pay your mortgage. If you default on your loan, you lose your down payment.
You may decide to have your bank wire the down payment money to the closing agent on closing day. That is certainly an option, provided there are no issues at the bank. Problems at the bank could cause the payment to fall through or be delayed. Without this money, you cannot close on the property.
Another option to pay the down payment would be to get a certified or cashier’s check from your bank. These types of checks are essentially the same as cash, so the funds are available immediately. You could also arrange for the down payment money to be wired a few days before the closing occurs.
Closing on a home is an exciting, and at times, stressful process. Knowing the potential pitfalls can help you prevent or react quickly to any closing issues.