What is the Worst Day to Close on a House?
LS
Summary:
The worst day to close on a house is a Friday. If there is some kind of problem with your closing, it may have to get moved to the following week, which could be a huge hassle. It might also be expensive if you’ve already scheduled movers, for example. Monday is also not a great day to close on a home because things tend to be a bit disorganized coming off a weekend. For the smoothest closing, your best bet is to book something for mid-week.
There is a ton of paperwork involved in the closing process of a house. A small mountain of it, really. All this paperwork means things can get mixed up, misplaced, or otherwise complicated or delayed.
If something does go wrong, and you also need to move right away, you will want a closing date that gives you at least one or two business days to sort out any issues. This is why closing on a Friday is the worst day. Closing on the Friday before a federal holiday could be even worse if you run into delays. Read on to find out more about the best and worst times for real estate transactions to take place and what to expect at your closing.
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Home buying 101
When buying a new home, everyone goes through the same basic process: pick a house, agree on a price, and you buy it, right? Well, it’s a little more complicated than that. Let’s take a quick look at the steps after you’ve chosen the home and agreed on a price.
Sign the contract and make a deposit
Once everyone is satisfied with the sale price, you’ll need to sign a purchase contract and make a small deposit (often known as earnest money), securing your intention to buy and locking in the price.
Secure financing
At this point, you should have already talked to a mortgage consultant, gone through pre-approval, and arrived at a loan estimate — the approximate amount the lender will allow you to borrow. But once the contract has been signed and you’re moving forward with the sale, your personal finance documents will be sent to underwriting to get final approval for the loan.
This is when you need to provide bank statements, verification of income, tax returns, and possibly other information to ensure the loan goes through. Keep in mind that this is where the closing day most often goes awry — either the financing falls through or there’s some other glitch in the matrix with your loan documents.
It’s most important to be organized and transparent through this process. It’s also critical not to make any drastic changes to your credit (not the time to buy a new car, for example) or your income at this time. Otherwise, your mortgage lender may ultimately deny your application, so be sure you pick the right lender for your financial situation.
Have the home appraised
This is often just a formality (and occasionally not even required), but you most likely need to have the home appraised before a lender will approve you for the loan amount you’ve applied for. It’s essentially just fact-checking to ensure the property is selling for what it’s actually worth.
Get a property inspection
The next step in the home-buying process is to have a thorough home inspection done by a certified home inspector. They will go over every square inch of the home to ensure there aren’t any major problems that may not have been immediately apparent.
Oftentimes if a home sale collapses, and it’s not because the financing falls through. It’s because the property inspection reveals bigger problems than you could have foreseen with a walk-through. There may be mold in the basement, a crack in the foundation, or a critter infestation in the attic.
If the home inspection does divulge some issues, you have to decide how you’re going to handle that. You may want to ask for a contingency that the owner make repairs before the closing day or you could ask for credits on the closing costs.
Alternatively, if the problem seems insurmountable, you may decide not to go through with buying at all. If you’re backing out because of a legitimate problem (as opposed to just cold feet), you should be able to get your deposit back.
Close on the house and transfer the title
If you’ve gotten this far, congratulations! You are ready to set a closing date, purchase title insurance, and undergo a title search, which will hopefully reveal a clear title.
At closing, you will basically sign a ton of paperwork before you get your keys and officially become a homeowner. Expect closing to take at least a couple of hours.
What to bring on closing day
Many home buyers will tell you that no real estate transaction will go off without a hitch, but that doesn’t necessarily have to be the case. To avoid any unpleasant surprises, keep in touch with your real estate agent, lender, title company, and/or closing agent in the weeks prior to your close date to make sure you have all your ducks in a row.
Last-minute complications often have to do with the large number of documents involved, so be sure to arrive equipped with the proper paperwork, and don’t wait until the last day to put it all together. Here is a list of items usually needed to close escrow.
Closing documents
- Photo ID. You’ll need to provide a driver’s license, passport, or other government-issued ID to prove your identity.
- Proof of homeowner’s insurance. Your lender will want to verify your homeowner’s insurance is already in place as protection for their investment.
- Cashier’s check. A few days before closing, your real estate agent should let you know exactly how much money you need to bring to the closing table. This amount, known as the “cash to close,” will include closing costs, down payment, prepaid interest, property taxes, and insurance.
- Closing disclosure. You should also receive this document prior to closing, which shows your loan amount, interest rate, and monthly payment. It should also detail how much of your payment goes toward principal, interest, private mortgage insurance (if applicable), property taxes, and homeowners insurance. Make sure the closing disclosure aligns with the other documents you signed at the meeting.
- Closing agent. In addition to your paperwork, you will want to bring someone to answer any questions you have, explain what you’re signing, and overall protect your interests. Your real estate agent, lawyer, or possibly an associate of one should act as your closing agent.
- Other items. Further closing items required may include the deed of trust, initial escrow statement, loan application, deed, mortgage note, title documents, and other paperwork depending on the state you live in. These should be provided at the closing by the lender, seller’s agent, or other persons involved to complete the transaction.
Best time of the month to close
Because mortgage payments are made in arrears, if you want to save on prepaid interest, your best bet is to close as late in the month as possible. Mortgage payments are always due on the first of the month. However, your first mortgage payment will not be due until after the first full month after your closing date.
For example, if you close on May 2, your first mortgage payment isn’t due until July 1. If you close on May 30, your first payment is still due on July 1. Does this mean you get a “free” month of housing if you close early in the month?
The short answer is no. Even though your first payment isn’t due until July, the mortgage interest is collected in arrears, which means you will still be paying interest for that month as part of your closing costs. So if you close on May 2, you will owe interest for almost an entire month — hundreds or even thousands of dollars — rather than just a couple of days if you closed on May 30.
Does it ever make sense to close early?
Having said all that, there might be instances where it does make sense to close on your house early in the month. For one thing, end-of-the-month closings are usually the busiest time for the lender, title company, and other parties involved in the closing process.
Things can get hectic and backed up and could take longer than usual. If the extra interest due with your closing costs isn’t a big deal for you, you might prefer to close earlier in the month simply for the more relaxed atmosphere.
Another reason to consider an early closing date rather than the end of the month is if you want that extra buffer of time before making your first mortgage payment. Maybe you and your real estate agent have already calculated how much you need for your down payment and closing costs, and you’re prepared for that. In some cases, it may feel easier to deal with moving and other expenses knowing you have that extra time before making your first “official” mortgage payment.
Keep in mind that you’re never really saving any money by closing earlier; it’s more a matter of managing your cash flow. If you can delay closing until the end of the month, you’re really better off in the long run.
FAQs
What is the best date to close on a house?
Despite the rumors, there is really no magical “best” date to buy a home — or worst date for that matter. Every deal is different and it’s really a matter of what is right for you at the time. Your best bet is to simply try to stick to a mid-week closing near the end of the month.
When is the best time to shop for a new home?
That’s debatable. In most areas of the country, spring is when you will find the most residential real estate activity. Many buyers want the closing to coincide with the end of the school year, plus there’s a lot of spring fever spurring people to make a change. However, while you’ll find the most inventory in the spring, you’ll also have a lot more competition for those houses, which means you’ll likely pay more.
Most people don’t want to move in the winter, though, so this is often a time where you might find better deals on houses and far less competition (albeit with less inventory to choose from). Plus, closing in January or February — versus May or June — is typically going to be a slower time for title companies, real estate agents, and mortgage lenders, making the process less stressful for everyone involved.
Key Takeaways
- The worst day to close on a house is generally a Friday, followed by a Monday.
- For a less stressful closing experience, aim for a mid-week closing to allow for any hurdles that may come up.
- By closing in the earlier part of the week, you allow more business days, if needed, to clear said hurdles.
- Make sure you have all of the necessary paperwork and funds ready prior to your closing date. This will make for a much smoother transaction.
- Closing on a house at the end of the month rather than at the beginning can save you money on prepaid interest at closing.
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