Borrowers regularly make costly mistakes when closing their loans. A higher rate or an extra point on your loan can cost thousands. An error on a prepayment penalty, balloon payment, or adjustable rate can cost you tens of thousands more. It is ultimately your responsibility to protect yourself from any mistakes.
Real estate is very likely your single largest asset and debt. It can also be your largest financial risk. Invest a little time and effort with the tips below to avoid these potentially costly mistakes.
Not Being Prepared – When you prepare for your closing, you get answers to all of your questions in advance and you know exactly what to expect when you arrive. Should any problems arise, you are prepared to act decisively and confidently to fix the problem.
Failing To Monitor Rates and Fees – A good lender will notify you of any significant rate changes, but always check yourself. Ask for an updated Final Good Faith Estimate from your lender to confirm and compare to current rates. If the change is significant, re-price your loan or switch loans if time permits.
Failing To Review Documents Before Closing – Avoid the trap of only reviewing the bottom line numbers. Ask the title company and your lender to send you your loan closing documents a day in advance for your review. In the event the documents are not available in advance, don’t worry. Simply review your initial application and disclosures since they make up the majority of what you will sign. At closing, you will quickly check the application and disclosures for any errors and then take as much time as you need to review the remaining items you have not seen.
Assuming Everything is Correct – Don’t assume everything is correct or that it will match what you received in advance. Review every page prior to signing. Specifically, verify your fees, loan amount, interest rate, and other loan terms like any prepayment penalty, balloon payment, or adjustable rate.
Not Hiring An Attorney When You Need One – If you need or want an attorney, get one. A few hundred dollars for an attorney is nothing compared to the cost of a mistake. It is worth the peace of mind.
Asking the Closer/Notary for Advice – The title agents can only provide a description of each document and answer basic questions. While they want to help, they cannot provide legal advice. The answers to some of your questions will effectively be legal advice. Only an attorney can give legal advice.
Closing Because “You Have To” – You never have to close. There is a lot of pressure to do so, but you have the legal right not to close. While it may cost money to wait, closing with a mistake can cost far more. Get answers, make things right and only close your loan once you are satisfied.
Please call or email me if you have questions about financing.