Buying a house isn’t as simple as just paying the money, signing the papers, and moving in. A real estate deal is a highly complicated affair involving many components, and often, it can take weeks before you are finally given the keys to your new home.
In the days leading up to the closing date, there are a number of things, like hiring a real estate attorney, that is highly recommended that homeowners should perform to ensure a smooth, risk-free transaction. Here is a full checklist for closing a house in Illinois.
1. Lock Your Interest Rate
Interest rates are constantly fluctuating subject to market factors. As a best practice, it might be advisable to lock the interest rate on your mortgage in advance with your mortgage lender. That way, you don’t risk suffering a possible rate increase when finalizing your home purchase.
Most banks in Illinois offer a mortgage rate lock for a duration of 30 to 60 days, ample for closing a property deal. Usually, a small fee also may be charged, but the cost is well worth it, considering how much you may be able to save up in the long run.
Even a 0.25% rise in mortgage rates can lead to a significant increase in your monthly payments. For a typical $300,000 30-year loan, an increase from 2.5% to 2.75% can translate to a difference of $47,710 in how much you will end up repaying.
2. Be Mindful of Lender Junk Fees
Some lenders are not above taking advantage of a buyer’s innocence. In closing of a mortgage, they may include with it junk fees – a series of excessive processing and documentation charges that are unexplained by the lender. Typically, they are of the following fee categories:
While most junk fees cannot be fully avoided, they can be negotiated to be substantially lowered. Be mindful of what you are being charged for, and if any fee seems unreasonable, be willing to speak up about it and stand your ground.
3. Be Sure to Meet the Funding Requirements
Before the deal gets closed, you should make sure that you have arranged for all the required payments associated with it. Failure to do so can risk the sale getting canceled and leaving you with a considerable financial loss. Not only does the earnest money you deposited will go towards the seller, but you will still be charged for the various services you used when the deal was still active.
4. Open an Escrow Account
A good way to minimize risks while closing a home deal is to open up an escrow account. This is an account held by a neutral third party on behalf of you and the seller. The money amount and transaction documents remain with the third party until all the parts of the deal have been settled. Afterward, they are handed over to their intended recipient.
5. Search and Insure Title
The person selling you the house may not be the only one entitled to it. Liens may be attached to it, or others could surface with a claim to the property and challenge the transaction.
Clearing the title is, therefore, an essential step in establishing and confirming a property’s legal ownership. Your title company may perform a search of the public records that can help you find out if a property’s title has any claims or liens against it before it is deemed clear.
It might also be highly recommended to purchase title insurance. This protects both you and your lender from any financial liabilities stemming from any liens, encumbrance claim, or other title defects.
6. Have All the Contingencies Checked
Many home purchase agreements in Illinois carry with them contingencies. It is recommended that you go through all of them before the transaction is made official. Among the most commonly included contingencies is a home inspection.
Home inspection contingency entails that you, as the buyer, have the right to have the home professionally inspected. If any significant issue or defect is found with the house, it gives you the opportunity to back out of the sale or request the seller to have the problems fixed free of penalty.
Other contingencies frequently included in the contract are appraisal and financing. With appraisal contingency, if the sales price is more than that of the appraisal price, you get to opt out of the housing deal without having to forfeit your deposit. Financing contingency safeguards your right to back out if your mortgage approval gets delayed beyond the timeframe stated in the sales contract.
It is important to know that contingencies usually have a specified deadline in which you have to take the necessary actions; otherwise, the deal may be considered approved as it is.
7. Get Home Pest Inspection
A pest inspection is separate from a home inspection, and in Illinois, a home pest inspection will typically cost you between $75 to $125. For such a reasonable fee, you can potentially save yourself from a huge financial loss.
Unnoticed, even a small infection such as that of termites or carpenter ants can spread quickly and do extensive, costly damage to the building; hence why getting a home pest inspection is essential. It is even listed as one of the requirements for loan approval from certain lenders.
8. Hire a Real Estate Attorney
While getting a professional legal opinion isn’t mandatory in Illinois, it nonetheless can be extremely helpful. Unless they are also licensed attorneys, real estate agents are not authorized to draft legal documents or give you legal advice.
With a transaction of this size and carrying with it a lot of complicated paperwork, an experienced lawyer could help you better navigate through the process as well as ensure nothing falls through the cracks, minimize your legal risks and possibly allow you to negotiate a fairer deal.
9. Read All the Paperwork
Faced with a huge stack of paperwork filled with difficult language can influence some buyers to just skip reading the details in some or all of them. But by choosing to do so, one risks signing themselves into agreements that will negatively impact them for years to come.
Aim to read all the paperwork carefully and fully understand what you are getting yourself into. If you have any difficulty with any line, consult your attorney on what it means and entails. Make sure that all the agreed terms are mentioned in the contract and don’t shy from protesting any fees or conditions that you feel are unjustified.
10. Do a Final Walkthrough
Many sale contracts allow you to conduct a final walkthrough of the house 24 hours before closing. It can be a good opportunity to make sure that the home you are getting is in the condition agreed upon in the contract, that the seller had indeed made the repairs that were requested, and no new problem has arisen since your last visit here.
Buying Real Estate in Illinois?
As mentioned, the process of buying real estate can be a complicated and even stressful affair. A professional real estate attorney can help make your transaction easier and help you deal with any real estate closing problems that require litigation. To schedule your free consultation today, call 312-756-8600 or reach out to us through our website.