Pre-Closing Period

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The pre-closing period, also known as the "escrow" period, refers to the timeframe between the acceptance of your offer and the finalization of the mortgage and transfer of ownership for the home. Typically lasting around a month, the duration can vary depending on the agreed-upon closing date and the time required by your lender to prepare for the closing process. During this important interval, there are several crucial tasks that you will need to complete to ensure a smooth transition to homeownership. 

The Pre-Closing Period: Lender Communication

During the pre-closing period, it is crucial to maintain open communication with your lender and promptly respond to any requests they may have. They might require additional information or documentation to proceed with the loan process. Even if you don't hear from your lender, it's advisable to periodically check in and inquire if there are any outstanding requirements. Remember that your lender has the final say on the closing timeline, and if any crucial information is missing, it could potentially delay the closing process. To prevent delays or the possibility of loan rejection, it's important to avoid taking on additional debt or making significant changes to your employment status. Lenders not only check your credit report and score during the initial application, but they also conduct another credit check shortly before closing. Therefore, obtaining new credit cards or loans, or significantly increasing the balance on existing cards, can be viewed as a risk by the lender, potentially jeopardizing your loan approval. Similarly, lenders may contact your employer shortly before closing to verify your employment status. If you no longer have a job, it can impact your ability to secure the mortgage loan.

The Pre-Closing Period: Homeowners Insurance

Prior to closing, it is necessary to obtain homeowners insurance to protect your property and belongings, as well as provide liability coverage in case of accidents or injuries on your property. It's important to note that standard homeowners insurance typically does not cover damage caused by earthquakes or floods. If your property is located in an earthquake or flood zone, specialized insurance may be required. Your lender will inform you if additional insurance coverage is necessary. For condominium purchases, you can consider obtaining condo insurance that provides coverage for personal property and liability, similar to renters insurance. When purchasing a homeowners insurance policy, you should evaluate whether you require any additional coverage beyond the standard policy. This may include earthquake or flood insurance, a personal article floater for valuable items not fully covered by the standard policy (such as artwork or jewelry), or replacement cost coverage that reimburses the replacement value of stolen or destroyed items rather than their current cash value. Comparing quotes from different insurance companies can help you find the best deal. Many insurance companies offer free quotes online or over the phone, making it easy to shop around and assess the available options. Keep in mind that while some people pay their car insurance in monthly installments, lenders often require homeowners insurance to be paid upfront for the entire year.

The Pre-Closing Period: Title Company/Attorney

The closing process is typically handled by an external party, either a title/closing company or an attorney, depending on the location. Your lender may allow you to choose the company or attorney yourself, or they may provide you with a recommendation. If you have the opportunity to select, it's worthwhile to inquire about the fees charged and the location where the closing will take place. Some parties may require you to visit their office, while others can arrange for a notary public to come to you. If a title company is handling the closing, you will likely need to use the same company for your title insurance as well.

The Pre-Closing Period: Final Walkthrough

Just before the closing and after the seller has vacated the property, it is advisable to conduct a final walkthrough. This walkthrough allows you to verify that the seller has left everything as agreed upon and that the property is in the same condition as when you initially made the offer. It is the ideal time to address any issues discovered, such as significant damage or unexpected changes, as the deal has not yet been finalized. After closing, your options for resolving such issues become more limited.

The Pre-Closing Period: Loan Estimate

Within three days of applying for a mortgage, your lender is required to provide you with a Loan Estimate. This document provides an estimation of your closing costs and offers a summary of your loan terms, including the initial loan amount, interest rate, and loan type. It is essential to carefully review the estimates provided in the Loan Estimate and compare them with the figures in the Closing Disclosure.

Note on title search and title insurance: A title company conducts a thorough search of public records to ensure that the seller is the legal owner of the property and that there are no outstanding liens or encumbrances. Your lender will require you to pay for lender's title insurance, which protects them in case any issues are overlooked during the title search. However, it is also advisable to consider purchasing owner's title insurance, which provides protection for you as the homeowner. If there are any outstanding liens on the property that have not been resolved before your purchase, you may become responsible for addressing them.

 By completing these essential tasks during the pre-closing period, you can help ensure a smooth and successful transition to homeownership. It is crucial to stay organized, communicate effectively with all involved parties, and seek guidance from your real estate agent or attorney to navigate this important phase of the home buying process.