The Steps to Closing on Your Home Massachusetts

At closing, you take possession -- and responsibility -- of your new home. However, there are many steps along the way. Here’s what to expect:

Purchase Offer

After you’ve looked around and found a house or condo you like, it’s time to make an offer. The question is: how much? Many buyers make one that’s 8 to 10 percent below the asking price. This gives you some room to negotiate with the seller. However, this a general strategy and might not work in high-demand locations. In a seller’s market, you might have to offer closer to the asking price. Just remember not to offer more than you can afford to pay.

Good Faith Deposit

This demonstrates the buyer is making a serious offer to the seller. The amount varies but can be several thousand dollars. Either the real estate agent or the seller’s lawyer holds the deposit in trust until the deal closes. Then the money is credited toward your down payment and your share of the closing costs. Depending on the terms of your contract, you may lose your deposit and be sued for damages if you decide not to close on a deal once your offer has been accepted. Your deposit will be returned if the seller does not accept your offer.

The Contract

If the seller accepts the offer, a contract is drawn up. It is a legal and binding obligation, on the part of the buyer, to purchase the property if the contingencies are met. It outlines transaction details, such as the sale price, the closing date, the possession date, a description of the property and any applicable contingencies.

Contingencies

Certain requirements are specified in a contract that need to be met before the deal can be closed. They usually include buyer’s securing of financing and an acceptable home inspection. Generally, financing contingencies run for 30 days. An inspection contingency usually covers 10 to 14 days from the acceptance of the contract. But in a seller’s market, buyers might be asked to fulfill their contingency requirements more quickly.

Home Inspection

This is for the buyer’s protection. Most people don’t know all the structural problems to look for when inspecting property. A professional can conduct a complete examination of a house or condo to assess its condition. The buyer should make it a contingency in the contract that if the home fails inspection, the offer can be withdrawn.

Settlement Statement or HUD-1

Also called a “closing statement,” this is a document that the Department of Housing and Urban Development (HUD) requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party -- the escrow agent -- to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement. To ready your finances and lessen the chances of any surprises at closing, ask your lender if they can get you a copy of your complete HUD-1 at least 48 hours in advance.

Closing Documentation

There’s more paperwork to be done before you’re finished. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner’s insurance. You must have insurance to get a mortgage.

Closing Costs

Closing costs vary. Your lender will give you a good faith estimate on these costs, but understand that some costs, particularly pre-paid interest, can change before the actual closing date. Some closing costs include:

• A lender’s inspection fee
• The cost of title insurance
• A loan origination fee
• An appraisal fee
• The cost of a credit report
• A mortgage broker fee.

Final Arrangements

You need arrangements to activate utility services, and you must you’re your first mortgage payment before the deal is closed and you take possession of the home.

Settlement

Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.