After spending all that money for a new-built custom home, you might think that your work is done. Chances are, you had to save up for a while in order to buy this new place. However, your labors are not yet over, and it is vitally important for you to realize that fact.
In this article, we will attempt to tell you everything that you need to know about closing on your new home. We will guide you through the process as best we can, but it falls upon you to do any additional research that you may require to gain a full understanding of this matter.
Step 1: Open An Escrow Account
Home purchases tend to involve a lot of suspended charges. One of the oldest and most common problems of commerce is this: Once you hand over the money, you can no longer guarantee that your wishes are respected. However, your builder has a similar problem. Once the work is completed, they can no longer guarantee that they will be paid.
The usual solution to this problem is an escrow account. This is a third-party holding account whose only purpose is to guard the money until the transaction is complete.
Step 2: Get Two Home Inspections
This is basically two steps combined into one. As you are probably aware, every state and locality has building codes that have to be obeyed. If your home is found to be non-compliant, you can face large fines as a penalty. Besides that, you will be liable for any necessary repairs. This is why you must have a proper home inspection done by a state-certified inspector. Once this is done, call a good pest control company and tell them you want a full pest inspection. This will tell you if the property has any issues or potential issues.
Step 3: Renegotiate If Necessary
If both inspections go well, you can probably skip this step. Chances are, you have already agreed on a price with your builder. However, this price is subject to change until you sign on the dotted line. If the inspectors find major problems, it is best to go ahead and cancel the contract before seeking another builder. If the issues are minor, however, you can simply use them as negotiating leverage. This might sound sneaky, but you have every right to receive a discount if your builder doesn’t meet their obligations.
Step 4: Get Approved For A Mortgage
Unless you are very wealthy, you will probably need a mortgage agreement. The process of getting approved for such an agreement can be lengthy and requires the submission of many documents. Before you get started, make sure you have all your tax, income, and bank records handy. You may also need receipts or copies of bills to verify expenses. If there are no problems with your application, you might be able to get pre-qualified and save yourself some time. This step will also most likely require a property appraisal.
Step 5: Insure Your New Home
You will need title insurance, homeowner’s insurance, or both. Title insurance is meant to protect you against any problems that might arise with your home’s deed. Homeowner’s insurance, on the other hand, is meant to cover any damages to your home that may occur. It might also cover assets that are kept on the property (like cars and boats), but you need to make sure that those assets are listed on the policy.
Step 6: Final Walkthrough
At this point, you have had several inspections done, but the builder has also had time to make changes. Although most builders are honest and won’t try this kind of thing, some are unscrupulous enough to pull the old “bait-and-switch” on you. To prevent this, and to make sure that everyone has been honest, you should always do a final walkthrough of the home with pen and paper in hand, looking for any flaws or areas in which your expectations have not been met.
Here is a quick list showing some of the things you want to see when doing your walkthrough:
- Total compliance with the contract
- Electrical outlets that work properly
- Functional plumbing
- Code compliance
- Windows and doors installed properly
- No signs of mold or water damage
- A clean and pest-free environment
- No construction scrap left behind
Step 7: Pay The Closing Costs And Sign On The Line
By now, you can relax your paranoia somewhat. You are almost done with the process and (hopefully) all is well. Of course, there are still some formalities that must be attended. The holder of your escrow account should notify you as to the time and place in which the deal will be closed.
Before you sign anything, make sure that you read it thoroughly. A lot of people have been duped by the “fine print” trick, so don’t be one of those foolish people who fall for such an old and well-known trick. Some companies might try to add extra costs, so make sure that every dollar you pay is justified. If you have an attorney who is knowledgeable about these things, you should definitely try to bring them along. It is also a good idea to get an estimate of the average closing costs for your area.
We hope that our work has made you better-educated as to the nature of this endeavor. Only by understanding the system can you hope to use it to your advantage. Don’t look at your builder as a friend…look at them as a business associate and nothing more. Otherwise, you will not be motivated to analyze and double-check the things that your builder tells you.
In most cases, dishonest people will tell on themselves if you listen closely. If you have found our article honest and truthful, we hope that you will fill out the contact form so that we can continue to help you with important matters like these.