Real Estate 101: Buyers Closing on a Home in the Iowa City Area

It’s the busiest time of year for closings on homes and I’m fielding lots of questions about the closing process. I figured it’s the perfect time to start a series Real Estate 101 where I’ll cover the frequently asked questions about the process of buying real estate in the Iowa City area.

The first thing is that there’s often some misunderstanding about the closing date and possession. I’ve had a couple of clients think they happen independently of one another. Here in the Iowa City area that is not the case. When you sign your loan documents at closing that’s also the time you can expect to get the keys/garage door opener to your new place. In signing the loan documents you provide funds to pay for the house and checks are distributed to the involved parties. At the same time sellers (or their agent) will have the documents transferring the property into your name. That’s the deal, you provide the funds, they transfer the property into your name. Fortunately none of this needs to be recorded before you can take possession of the house. The recording of the documents happens later and is not something you are a part of.

Can you start moving your stuff in before closing? Nope, that’s not an option. Both you and the seller need to have signed all the necessary paperwork before you can start moving your stuff in. Are there exceptions to this rule? Yes, if you and the seller write a clause into the contract or write an addendum to purchase prior to closing there are sometimes exceptions. There need to be extenuating circumstances though and it requires prior approval from both parties. That’s called early occupancy and a subject I’ll cover in a follow up post.

So now to maybe the biggest question I get: When will I know how much the check needs to be that I bring to closing? This is information that you will have when you get the preliminary copy of the HUD1 Settlement Statement from your bank prior to closing. Some banks are quicker than others providing a copy of the preliminary HUD 1. This can be for a variety of reasons. Sometimes they’re waiting on documentation from agents, other times they’re just plain busy. I’m usually all over this one and am definitely not in the “slow agent” category. I work with a lot of first time buyers (and sellers) who are pretty nervous about surprises at closing and I tend to push to get the HUD 1 as quickly as possible.

Of course, I should mention that you do have a GFE, Good Faith Estimate that you received when you applied for your loan. The costs of closing the loan will come very close to what you see in the GFE. Unfortunately the new improved GFE that came into force in January 2010 doesn’t include the down payment, so you’ll need to figure out that part yourself. (Not a particularly consumer friendly improvement if you ask me!)

These are a couple of the big questions I get about closing on a home. Am I missing something you’d like to see here? Leave a comment and I’ll remedy that!