The Title Professionals - "We Close The Deal.", Real Estate Settlement

When is the Best Time to Settle?

Coordinating a settlement date between buyers, sellers, real estate agents, lender, movers, and settlement agent can be like trying to get a family of five to agree on a restaurant - it is impossible to please everyone. It is possible, however, to have a smooth efficient settlement without hassle if you keep a few principles in mind: When choosing a settlement date, it is important to determine the type of financing (if any) the seller has secured against the property. If the seller has no mortgage, a conventional mortgage, or VA insured mortgage, the settlement date has no financial impact on the seller’s payoff figures. However, if the seller has an FHA insured mortgage, then it would behoove the seller to schedule the closing towards the end of the month, particularly between the 22nd and 26th. FHA loans do not have prorated interest, so in order to pay the loan off, a full month of interest must be paid for each month (whole or partial) that a seller has the loan along with the principle balance. For example, if a seller with an FHA loan closes after making a May payment, he pays interest from May 1st to May 31st. However, if the same seller closes one week later on June 2, that seller will pay interest from May 1st to June 30th. It is best to avoid closing on the last two days of the month because the settlement company may need several days to receive lender funds, record, and disburse all of the funds.

If the seller does not have an FHA mortgage, try to avoid scheduling the settlement for the last week of the month. The cliché regarding timing of closings is "pay now or pay later." The total per diem interest paid on the new loan will be higher at the beginning of the month, but the time between closing and the first payment will be longer. Only the buyer who is in a truly precarious financial position, receives any advantage to closing at the end of the month. All expenses between the buyer and seller will be prorated at closing. At the end of the month, lenders, title companies and real estate agents are swamped with closings. The result tends to be that loan papers are delayed, settlement agents get behind schedule, and real estate agents sometimes find it necessary to leave in the middle of closing. If the closing can be scheduled prior to the last week of the month, the client will experience shorter waiting times for a settlement agent and/or lender papers. Lenders and settlement office personnel will also be more accessible for questions and assistance.

Finally, try to avoid scheduling a closing for 5:00 P.M. or later. Most businesses, including the mortgage companies, repair people, insurance agents, etc., are closed after 5:00 P.M. If there are any problems which are not resolved at settlement, everyone will have to wait until the following days to settle the issues. This is a particular problem with 5:00 P.M. Friday settlements, especially if the parties are planning to move over the weekend.