The homebuying process can be long and arduous, and it doesn't end when you find a place you like. An entirely new process begins once you submit an offer on your dream home, and many buyers are surprised to learn how expensive and confusing closing a deal can be. If you're buying a home for the first time, you might be baffled by the terminology and protocol that gets thrown around during a closing. Don't be overwhelmed by jargon. Use this guide to prepare for a painless home closing:
Know the words
Unless you're a real estate agent, it's likely that many of the terms used during a home purchase will sound pretty foreign. Few people know the difference between joint tenancy and tenancy in common, but having a basic understanding of what these words mean will make you feel much more confident during the transaction.
Much of the discussion during a closing refers to the title, the document that bestows ownership of the house on a specific party. One person or several people can hold a title, and this results in the variety of terms you'll hear as you complete a home sale. There are four types of title ownership you should keep in mind:
- Sole ownership: If a single person purchases the house, he or she is the sole owner. This is the simplest type of home sale.
- Tenancy by entirety: Married couples who make financial purchases together generally use this type of title ownership. Both parties in the relationship technically own the entire house, and if one person dies, the home transfers to the other tenant.
- Joint tenancy: This occurs when two or more people purchase a house together. Unlike tenancy by entirety, each tenant in this relationship owns only a share of the property. No single member could sell the house, and tenants can divest themselves of their shares at any time.
- Tenancy in common: This final scenario functions like joint tenancy but has a provision that passes a tenant's share onto his or her heirs when the tenant dies.
â€‹Be ready to pay
The closing process can be expensive, and the costs catch many homebuyers off guard. Zillow noted that the average closing cost is between 2 percent and 5 percent of a home's purchase price. Closing costs are actually charges levied by the mortgage provider.
These charges pay for a wide range of services that help the bank decide if it should lend you money to purchase a house. This includes a credit check to gauge your financial security, charges to cover a home inspection and payments for everyone who evaluates your loan application. While some lenders make loans available without a closing cost, Zillow explained that these offers usually result in a higher interest rate over the life of the loan.
Contact a professional
The actual act of closing a deal for your home will involve signing several documents. This paperwork will be written for lawyers, and may be difficult to understand. Each document will also be quite long. While you don't need to read each of these papers entirely, you will want to know what you are agreeing to with each signature. Before you sign anything, contact a lawyer and have him or her review all of the applicable documentation. The lawyer should be able to break all of the information down in plain English, and can alert you to any potential issues.
If you have any questions about the closing process, speak with a professional. Buying a house is stressful under any circumstances, so hire someone who can make things easy.