5 Tips for Choosing a Closing Date!

Bobby Fenner, Lic. in VA
Bobby Fenner, Lic. in VA
Published on March 23, 2017

settlement date

Choosing a Closing Date

One of the major decisions you’ll need to make when making an offer to buy a home is the closing date. This date in in the contract and all efforts, from the time the contract is accepted by the seller until you’re handed the keys, are aimed at meeting this date.

If you are the seller, by the way, you should know that the closing date, like many of the contract terms, is negotiable, as long as the buyer’s lender can fund the loan by the chosen date. We have often seen protracted negotiations over closing dates since both the buyer and the seller have a vested interest in this contract clause.

That said, there are several things to consider when choosing a closing date aside from when your lease terminates (if you are currently renting) and the estimated date on which the lender will be ready to fund the loan.

1.Since prepaid interest, which is paid at closing, is prorated from the date you close to the end of the month, you will pay less if you close at the end of the month, a good choice for the cash-strapped homebuyer.

For instance, suppose your loan amount is $300,000 at 6 percent interest and the sale closed on January 10. You will be required to pay for 22 days of interest, or $1,085.04. If you close on the 25th, however, you will only pay six days of interest, or $295.92.

Keep in mind, however, that there are many cash-poor homebuyers, or those that are hoping to hang on to their cash to use to fix up the new home, so there is typically a backlog of closings near the end of each month.

2.If you’re worried about cash flow, close early in the month. Yes, you’ll pay more in pre-paid interest, as the above example shows, but because interest in paid in arrears, you won’t have a house payment for slightly less than two months. Suppose you close on January 5. The prepaid interest covers you until January 31 and, since interest is charged in arrears, you won’t have a house payment for February until March 1, giving your cash flow some breathing room.

3.Try to avoid closing during the holidays, especially near Christmas and the days before New Year’s Day. Most of the real estate industry and city offices have uncertain schedules during this week so the chances of a smooth closing are greatly diminished. Additionally, there’s already enough stress around the winter holidays without adding closing on a loan and moving into a new house to the mix.

4.If you want to be able to move in during the weekend, the Buy or Sell Hampton Roads Team suggests that you close by at least Wednesday. This gives the title company time to get the deed on record and you’ll have keys in hand in time to move in on Friday or Saturday.

5.If you are also selling your New home in Coastal Virginia Beach or Coastal Chesapeake, VA consider your current loan. The interest rate may be a little higher than the interest for your new loan; so it may be better to choose your closing date based on this – close as soon as possible.

By the way, if you’ll getting  an FHA-insured loan, you will be expected to pay 30 days interest regardless of when in the month you close. Hence  it may be better to close as near to the end of the month because you are paying for it anyway.

Tip: The closing and the occupancy dates may not necessarily be the same. The date when you close is the date on when the ownership of your home is transferred to you while occupancy generally doesn’t happen until after the sale is recorded at the Virginia Beach recorder’s office. This date, like others in the contract, is negotiable. Some sellers permit the buyer to move in just prior to closing, but there are insurance and other considerations along with this scenario. Also, the sellers may need more time to move out and have to “rent back” the home. It is advised that you consider all options these “5 Tips for Choosing a Closing Date”. And don’t forget your occupancy date. 

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