Buying a home involves many processes, one of them being the closing process. Within the closing process, an important step to finalizing buying a home is the closing date. While there are other options you can consider in choosing your closing date, there are 3 main options that reflect the timing of your first monthly payment and how much you will pay in closing costs on the closing date.
What is Closing?
Closing is the final stage in the home buying process. This allows the seller to close the deal on the home and transfer the title to the buyer. There are a few documents involved in the closing process, such as the closing disclosure statement and promissory note, which lays out the details of the costs of the home and how it will be paid. These documents will also include the title and deed, to show ownership of the property once purchased.
Lastly, there are the closing costs. These closing costs are often described in the documents above like the disclosure statement, in full detail, so the buyer understands what they are being charged for and why. Closing costs will often include any taxes, title insurance, appraisal fees, credit report charges, and any additional costs/fees that may occur when purchasing a home, besides the monthly payment.
Choosing your Closing Date
While there are many things to consider when closing on a home, the closing date can make or break the deal for the seller. You want to carefully choose your closing date, so that it benefits both yourself- the buyer- and the seller. Here are 3 main options you can take into consideration, or choose from, when deciding on a closing date.
The first option to consider is closing at the beginning of the month. When closing at the beginning of the month, an amount of prepaid interest will accrue during that month, between the date of closing and the end of the month. This means you will have to bring more money to the date of closing to account for the prorated interest. However, closing at the beginning of the month provides more time between closing and the first mortgage payment. For example, if you close on a home June 1st, your first mortgage payment will not be until August 1st, giving you roughly two months to catch your breath.
Another option to consider is closing at the end of the month. When closing at the end of the month, you won’t accrue as much interest from the closing date to the end of the month. This means you won’t have to pay as much in prepaid interest at closing. However, this gives you less time between the closing date/costs and the first mortgage payment. For example, if you close on a home June 30th, your first mortgage payment will be on August 1st. This will leave you with about one month to prepare for your first payment.
Lastly, there is the option to close in the middle of the month. If you’re unsure of what payments you want to make at closing, or when you would like to make your first mortgage payment, closing in the middle of the month is a great compromise between the two deciding factors. With this option, you will only owe half a month’s worth of prepaid interest at closing. You will also have about a month and a half to prepare for your first mortgage payment.
Making the Right Decision for You
When closing on a home, you will want to consider the seller and the lender. Many times, disagreement with the closing of a home, especially one with multiple offers, can cost the buyer their dream home. You will want to give the lenders enough time to process the deal, roughly 30-45 days after the offer has been accepted. When you have concluded your closing date, be prepared to talk to the lenders. Any last-minute changes may delay your closing date.
Choosing the closing date can seem overwhelming, but as you have seen, it all depends on what payments you are comfortable with making at closing and how much time you would like between the closing date/costs and your first mortgage payment. In the end, all factors considered, you want to make sure you’re closing on a home at the best time for you.