When you make an offer to purchase a Southern Maryland house, you’ll need to choose a closing date. This date goes into the contract and every effort – from the time the contract is accepted until you’re handed the keys – are aimed at keeping this date.
If you’re the seller, know that the closing date, like many of the terms in the contract, is negotiable as long as the buyer’s lender can fund the loan by that date. We’ve often seen lengthy negotiations over the closing date because the buyer and the seller have a vested interest in this clause of the contract.
There are several things to consider when choose a closing date, aside from when the lease on your current home ends and the estimated date when the lender will be ready to fund the loan.
Interest
Prepaid interest is paid at closing, and it is prorated from the date you close until the end of the month. You’ll pay less if you close at the end of the month, which can be a good choice for a cash-strapped buyer.
For example, suppose your loan amount is $300,000 at 6 percent interest, and the sale closed on Jan. 10. You will be required to pay for 22 days of interest, or $1,085.04. If you close on Jan. 25, however, you will only pay six days of interest, or $295.92.
Remember that there are a lot of people in your situation, so there is typically a backlog of closings at the end of each month.
Cash Flow
If cash flow is a concern, close early in the month. Sure, you’ll pay more in pre-paid interest as shown above, but because interest is paid in arrears, you won’t have a house payment for just shy of two months.
Let’s say you close on Jan. 5. The prepaid interest covers you until Jan. 31 and since interest is charged in arrears, you won’t have a house payment for February until March 1, which can give your cash flow some breathing room.
Holidays
Stay away from winter holidays, especially near Christmas and the week before New Year’s Day. You’ll find that much of the real estate industry is closed during this week, so the chances of closing on time will be diminished. Plus, who wants to add closing and moving onto the stress already present during the holidays!
Day of the Week
If you want to move in over the weekend, close by at least Wednesday. The title company will have enough time to get the deed on record, and you’ll have the keys in plenty of time to move in on Friday or Saturday.
Current Loan
Consider your existing loan if you’re also selling a home. If the interest rate is higher than the new loan, it may be better to choose your closing date based on that fact; close as soon as you can.
If you’ll be using an FHA-backed loan, you will have to pay 30 days of interest regardless of when you close during the month. In this case, you may want to close at the end of the month since you’re paying for it anyway.
Tip: Remember that the closing date and occupancy date will not necessarily be the same. The date you close is the date ownership is transferred to you, but occupancy doesn’t usually take place until after the sale goes on record at the county recorder’s office. Like most in the contract, the occupancy date is negotiable. Some sellers let the buy move in before closing, but there are insurance issues to consider if you want to do this. Then there are sellers who need more time to move out and “rent back” the house while they finish moving. Consider all your options when you choose the occupancy date.
La Plata MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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