step 7: Get Ready for Closing

Home Inspection

You should have your home construction thoroughly inspected by an independent inspector prior to taking possession:

• You need to hire an independent inspector to review the work. These inspectors will check the quality of the work and determine whether the work has been completed as specified and agreed to in the construction plan and contract.
  
  Any work that fails inspection must be written up
  by the inspector. The inspector must state
  reasons for failure as it relates to the
  construction plan and contract.
  
  This inspection report will be used to negotiate re-work.
  
  For more information on construction inspection:
  http://stats.bls.gov/oco/ocos004.htm
  

Finding a Good Inspector

or use the local Yellow Pages to search architects:
search yellow pages for home inspectors

Other Places to Look:

• Ask your builder, county officials, real estate agent, attorney or lender to recommend a good construction inspector.
  
  Look for inspectors who are members of professional affiliations such as the Association of Construction Inspectors.
  
  The ACI sets the standards for construction inspections and requires its members to abide by a code of ethics and standards.
  
  Associations of Construction Inspectors:
  http://www.iami.org/
  
  
  

• Most inspecting companies will have Specification Inspectors, individuals who are specialized in a particular phase of the inspection.
  
  It is unlikely that you will work with the same inspector throughout all phases of the construction project.
  
  The cost for the inspection will vary by region and the size of the construction. You should accompany the inspector to ask questions and describe the work as it relates to the construction plan.
  
  Provide the inspector (or inspection company) a copy of the project specification plan. Discuss with them your vision of the remodeling project.
  
  The Inspection will assess the quality and condition of the following construction phase (as defined in your project specification plan):
  

Completing a Final Walk Through

• Before closing on your home, it is advisable to complete a final walk through the home.
  
  Review the inspection points. Ensure that everything noted on the inspection report have been completed as specified.
  
  
  
• Make one more visual inspection as you complete your final walk through:
  
  
  • run the appliances to see if they operate properly
  • run the air conditioning and test for broken window seals
  • investigate any bad floor spots
  • check the walls for damage
  • check the wall's and ceiling's paint/wall paper
  • inspect the attic
  • eye under the outside eaves for proper installation
  • investigate potential drainage problems
  • check the driveway and sidewalk for damage
    
    
    Any problems that were previously discovered and have not been corrected as specified in the inspection reports must be noted prior to closing. It is the contractor's responsibility to fix them.

Notes: House Closing Introduction

The following information was obtained from the Federal Consumer Information Center

(note: the information below is for "home buying", but similar processes will be required when closing on your home construction loan)

Buying Your Home: Settlement Costs and Helpful Information
http://www.pueblo.gsa.gov/cic_text/housing/settlement/sfhrestc.html

Closing costs are usually associated at the time of taking possession of your home. These include:

• Attorney's or escrow fees (yours and your lender's if applicable)
• Property taxes (to cover tax period to date)
• Interest (paid from date of closing to 30 days before first monthly payment)
• Loan origination fee (covers lender's administrative costs)
• Recording fees
• Survey fee
• First premium of mortgage insurance (if applicable)
• Title insurance (yours and your lender's)
• Loan discount points
• First payment to escrow account for future real estate taxes and insurance
• Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
• Any documentation preparation fees

What happens on closing day?

• You will need to present proof or receipt that you have paid for your homeowner's insurance policy for the new home.
  
  
• The closing agent (or attorney) will list the money you owe the seller (remainder of down payment, prepaid taxes, etc.)
  
  
• The closing agent (or attorney) will then list the money the seller owes you (unpaid taxes and prepaid rent, if applicable).
  
  
• The seller will provide proofs of any inspection, warranties, etc.
  
  
• You will sign the mortgage agreement and mortgage note, agreeing to the lending and repayment provisions. You will also agree that if you fail to make payments, the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses.
  
  
• The seller will give you the title to the house in the form of a signed deed.
  
  
• You will pay the lender's agent closing costs. The agent will then provide you a settlement statement listing by line item those costs that you have paid.
  
  
• The deed and mortgage will then be recorded in the state Registry of Deeds listing you as the new homeowner. You will then take possession of the home.

What do you get at closing?

• Settlement Statement, HUD-1 Form (itemized list of all related closing costs, this form must be completed and given to you at or before closing)
• Truth-in-Lending Statement
• Mortgage Note
• Mortgage or Deed of Trust
• Binding Sales Contract (prepared by the seller; your lawyer should review it)
• Keys to your new home

Notes: Getting Ready for Closing

The following information was obtained from the Federal Consumer Information Center

Buying Your Home: Settlement Costs and Helpful Information
http://www.pueblo.gsa.gov/cic_text/housing/settlement/sfhrestc.html

Selecting an Attorney:

• Before signing any closing documentation, you should have an attorney review the documents and closing instructions to ensure that your interests are protected. In some parts of the country, the attorney may act as settlement/closing agents, representing the buyer, seller, lender, and others in the closing settlement.
  
  
• Your real estate agent can assist you on selecting an attorney. Or you can shop around. Make sure the attorney is experienced in closing settlements.
  
  for attorney search -- from lawyers.com
  http://www.lawyers.com
  
  
• Some questions to ask when selecting your attorney:
  
  
  • What is the attorney's charge for negotiating the agreement of sale, reviewing documents and giving advice concerning those documents, for being present at the settlement, or for reviewing instructions to the escrow agent or company?
  • Will the attorney represent anyone other than you in the transaction?
  • Will the attorney be paid by anyone other than you in the transaction?

Selecting a Settlement Agent:

• Settlement practices vary from locality to locality, and even within the same county or city. Settlements may be conducted by lenders, title insurance companies, escrow companies, real estate brokers or attorneys for the buyer or seller.
  
  
• Your real estate agent can help secure settlement services. Or if you are on your own, shop around for a settlement agent, which could be your attorney.
  
  
• In some parts of the country (particularly western states), settlement may be conducted by an escrow agent. The parties sign an escrow agreement which requires them to provide certain documents and funds to the agent.
  

Securing Title Services:

• Title insurance is usually required by the lender to protect the lender against loss resulting from claims by others against your new home.
  
  
• In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. The attorney's fee may include the title insurance premium. In other states, a title insurance company or title agent directly provides the title insurance.
  
  
• The title insurance policy does not protect you. If you want to protect yourself from claims by others against your new home, you will need an owner's policy.
  
  
• Under RESPA, the seller may not require you, as a condition of the sale, to purchase title insurance from any particular title company. Generally, your lender will require title insurance from a company that is acceptable to it.
  
  
• The title insurance company will issue a "Commitment to Insure" or preliminary report or "binder" containing a summary of any defects in title which have been identified by the title search, as well as any exceptions from the title insurance policy’s coverage.
  
  
• The commitment is usually sent to the lender for use until the title insurance policy is issued at or after the settlement. You can arrange to have a copy sent to you (or to your attorney) so that you can object if there are matters affecting the title which you did not agree to accept when you signed the agreement of sale.
  
  
• If you are buying a newly constructed home, make certain your title insurance covers claims by contractors. These claims are known as "mechanics’ liens" in some parts of the country.
  
  
• Lenders or title insurance companies often require a survey to mark the boundaries of the property. A survey is a drawing of the property showing the perimeter boundaries and marking the location of the house and other improvements.

Managing Your Mortgage Loan

• We have information on managing your mortgage loan at our Pick-My-Mortgage.com web site:
  
  click here: http://www.PickMyMortgage.com