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10. Pre-Settlement and Closing

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A. Pre-Settlement

It is incumbent upon you to ensure all remaining documentation the lender needs is provided in a timely manner so as not to delay closing. Be careful not to incur any more debt prior to closing as most lenders will re-check your credit report to ensure you still qualify for the mortgage. Wait until after closing to buy that refrigerator, sofa or dining room set.

Appraisal: One of the major bottlenecks to closing on time is completing the appraisal. The appraisal fee should be paid for at loan application so the lender is free to order it just as soon as possible. Normally buyers want to wait to see that the home inspection goes well before spending more money on an appraisal. Appraisers sometimes take a couple weeks to complete an appraisal.

Homeowner's Insurance: Some of the decisions you will need to make prior to closing include what homeowner's insurance company you want to provide hazard and liability coverage on your home. Homeowner's insurance is a complicated subject. The Virginia State Corporation Commission publishes a Consumer Homeowner's Insurance Guide. You will need to provide the name, company and phone number of your insurance agent to your settlement agency. Recommend you obtain replacement cost coverage.

Survey: A survey of the property may not be required by the lender but it is foolish in most cases not to order a survey of the land you are about to purchase. You will want to know exactly where the boundaries of your property are and if there exist any encroachments, easements or building set back requirements. If you are buying a condominium you don't need one. If you are buying vacant land it is a must. In this case you want to be sure that the land may be used for your intended purpose. There are also special considerations and inspections required when purchasing raw land. You will most likely need a soils drainage management plan and an environmental study.

Title Insurance: Your lender will require you to purchase a lender's title insurance policy which covers them in the amount of your loan. Recommend you purchase an owner's policy covering you for the full amount of the purchase price. In spite of all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing such as someone other than the seller claiming to have ownership interest in the property. Title insurance is a one time premium paid at closing and lasts as long as you or your heirs have an interest in the insured property. The Virginia State Corporation Commission publishes a Consumer Title Insurance Guide. You are free to choose from whom you purchase your title insurance policy. The settlement agency will normally have an affiliated business arrangement with a title company. You may always buy title insurance later if you don't purchase it at closing but purchased together with a lender's policy you will receive a discounted simultaneous issue rate. If there is a way to obtain a copy of the owner's title insurance policy and depending on how old the policy is, you may be able to obtain a reissue rate discount.

Walk Thru Inspection & Transfer of Utilities: Normally the seller is responsible to maintain the utilities in their name for the walk thru inspection, unless you have negotiated an early possession agreement which allowed you to move into the property prior to closing. In this case you will already have the utilities on in your name and the walk thru would have been conducted upon your taking possession of the property. In most cases the walk thru inspection occurs either the day before or morning of closing.

Builders generally schedule walk thru inspections several days prior to closing so they can work off your punch list of issues prior to closing. The builder's supervisor will conduct the walk thru and ensure you understand all the working features of your new home. You and your buyer representative will complete the walk thru inspection form for resale homes to ensure the appliances; heating, cooling, plumbing and electrical systems are still operational.

You may wish to hire your home inspector to re-inspect items that were agreed to be repaired. You should ask the seller to provide receipts at walk thru for all work that was agreed to be performed on the property. The seller should also leave any instructional manuals for the appliances, pool equipment, in-ground sprinkler, security, heating, cooling or other systems. This Utility Phone Number Guide provides contact information for Hampton Roads utility companies.

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B. Closing

Most contracts specify whether the buyer or seller chooses the place of settlement. Regardless, you may choose whomever you want to come to and represent you at closing. Both your lender and REALTOR® need to know who will be handling your side of the closing as there are many documents which need to be sent to your settlement agent for closing to occur. In most cases it simplifies procedures if both buyer and seller use the same settlement agency. Closing dates are scheduled on week days as settlement agencies are closed on weekends and holidays. The time for closing is scheduled about a week prior to closing and is set to occur during normal business hours.

The settlement agency can be a title company or attorney. The main function an attorney performs with regards to a real estate closing in Virginia is to prepare the deed. The deed, most often a General Warranty Deed, is the document that transfers ownership of the property from the seller to the buyer and which is recorded at the city or county court house. It is the most important document you will sign at closing. Only settlement agents licensed with the Virginia State Bar as attorneys can provide legal advice to the parties involved in the transaction.

The settlement agency will inform you how much money you will need to bring to closing. A cashier's check in the appropriate dollar amount made out to the settlement agency will be required at closing. You may also wire transfer the required funds into the settlement agency's account prior to the closing date. Personal checks are not acceptable.

The closing itself should last no more than two hours. All signing parties will need to bring a government issued picture ID like a driver's license. If you are signing by power of attorney for someone else, the original power of attorney must be brought to closing. The lender and settlement agency must review and approve the power of attorney prior to closing to insure its validity. A general power of attorney is not acceptable; it must be a specific power of attorney authorizing you to transact on behalf of the buyer for the specific property being purchased.

You will sign many documents to include the HUD-1 Settlement Statement, a kind of balance sheet of all the funds changing hands between the parties, the mortgage papers to include a Truth in Lending Statement which details your obligations to the lender and the deed. Don't be afraid to ask questions if you do not understand what you are signing. It's the settlement agent's job to make sure you understand what you are agreeing to. After all documentation has been signed and all monies paid, possession is usually transferred and you receive the keys to your new home. Congratulations, you are now a homeowner!

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10 Steps to Buying a Home