"Timing" your closing

As investment advisors say, you can't time the market. But in real estate, there is one sure thing--the end of the month will be a busy time for closings. Why? Well, when you buy a home, the interest clock starts ticking from the date of closing. When you pay your mortgage, the interest is paid for the full month in arrears. That means that any interest 'charged' in the current month is due at closing. Let's put that into perspective. Today is the 11th. IF you closed today, your new loan's first payment would be due in APRIL. When you pay April's payment, guess what? You just covered all the interest for MARCH. That leaves February hanging so that would leave 19 days of interest left due and payable at closing. For a $200,000 loan at 4.25%, that would be around $23 per day SO you'd have to come up with $437 at closing to cover the interest. If you closed on the 29th, you'd have to pay ONE day of interest or $23; if you closed on Friday the 26th you'd pay $92. IF you are a cash-strapped buyer that extra money can mean a LOT (like paying for movers or pizza for all your buddies who are helping you move). I can see why people want to close at month-end but let me tell you why NOT.

Think of it this way--this is not a revelation to realtors and loan officers. They know their clients' personal situations and will try to schedule these cash-strapped buyers on the last day or as close to it as possible. Again, I get it BUT just realize that there are many issues that could come up. As EVERYONE is super busy, what happens if something goes wrong? Primarily, if the loan is delayed then the closing can be delayed. Again, everyone is busy; things happen. BUT why would you want to set yourself up for something to happen to YOU? Also, people tend to want to close on Friday. Why? Well, the theory is so that they can move the next day. IF something goes wrong though, guess what? If your Seller (especially if they are a builder) "doesn't care" that you have a $100/hour mover idling in the cul de sac. They "don't care" that you have everything lined up. If they don't get their money, it didn't fund. If it didn't fund, you don't own a home. If you don't own the home, do you expect them to just let you move in? NO. Again, they aren't truly uncaring people (hence the quotes around don't care). With that being said, ask any closing attorney or agent about horror stories about people moving in and causing damage, etc. prior to owning the home, with the extreme example of that happening PLUS something totally going south with the loan process and then they can't actually buy the home. Who would be stuck? THE SELLER. (SO if you are a Seller, think twice about allowing someone to move in w/o closing; call and ask me why sometime; that's another post!).

Tips? Close the equivalent of the week of the 20th or 25th on a WEDNESDAY. Why? Well, you're close to month-end (less out of pocket, CHECK) and guess what? If 'something' happens at closing, there are several days to sort it out. What could happen? Missing documents, underwriting issues, missing funds, delayed funding wires, delayed documents, etc. etc. etc. In all honesty, I haven't had many closings take more than a day (extra) to fund when issues have come up; but if it was on a Friday, you'd be looking for a hotel!

There's my tip for the day! Get out there and find your next home! (and remember to call us to close it for you!) Bo