Under Contract: Now What?
The day has finally arrived when you will own your very own home! You should follow these suggestions (and the advice of your Realtors ®) to make your settlement as smooth as possible.
When you purchase a home, you must make a down payment. You can choose a down payment that makes sense (depending on your mortgage); remember, the more you put down, the faster it will pay off and the lower your monthly mortgage payments will be.
An escrow or settlement company will act as an independent third party during this time of purchasing your home so that you will know when and to whom to give your money so that the deed to your new home can be obtained. During escrow, the settlement company will hold your deposit and coordinate closing activities. Attorneys or brokers may also retain this deposit check. You must have sufficient funds in your checking account to cover this check.
Checks for deposits will be cashed. This money will be applied to the purchase transaction of the home if the sale goes through. The deposit may be refunded in full if the deal does not consummate, less standard cancelation fees. There are also some reasons, money may be able to be retained by the seller as liquidated damages in certain circumstances.
Escrow generally lasts 30 days, but it can be longer or shorter. The contract specifies that each item must be completed satisfactorily during this time. When you open escrow, you will have worked out a delivery date and contingencies with the seller. Contracts vary, but most include the following:
1. Inspection Contingency: After signing the contract to purchase, you work each inspection contingency as soon as possible, as unsatisfactory results during this time may result in the contract being canceled.
2. Financing contingency: After the contract is signed, you have an agreed time to secure funding. If you cannot obtain financing during the period provided by the agreement (and the seller will not extend the time), you must decide whether to remove the contingency and take your chances. Cancellation of the purchase contract is an option you may choose to take.
3. A requirement that the seller must provide a clear title. Review the title report with an attorney or title officer. It is essential to make sure that your title is "clear" to avoid any future legal issues. Ensure that you and the seller have complied with local and state laws regarding property transfers.
4. Secure homeowner's insurance. You will probably need this before closing the deal. As a result of requirements such as fire and earthquake insurance, obtaining this insurance may take a long time. As soon as the contract is signed, you should apply for insurance.
5. Make arrangements with local utility companies to have service turned on when escrow closes.
6. Schedule the final walk-through inspection. At this point, you should ensure that the property is exactly as described in the contract. It is possible that the seller removed what you thought was a "permanently attached" chandelier from the property and replaced it with a completely different fixture.
Congratulations! You've accomplished what you set out to do! Upon closing, you will be the proud owner of your new home. Congratulations!