When purchasing a home, one crucial question you’ll face is, “What day do you want to close?” While this may seem straightforward, selecting the best closing date requires careful consideration. Here are some key factors to keep in mind, particularly for those using traditional mortgage options.
The Importance of a Firm Closing Date
The closing date in your contract is intended to be a firm commitment for all parties involved. It sets the timeline for everyone to work towards and signifies your agreement to strive to meet this deadline.
Popular Choice: Last Friday of the Month
Many buyers prefer to close on the last Friday of the month. This choice can be advantageous as it minimizes the daily interest cost, which is a component of your prepaid expenses due at closing.
However, consider the potential downsides:
- Delays: If there are any delays, you’ll face adding a weekend before closing, complicating moving plans if already scheduled.
- Increased Costs: A delay pushing the closing into the first week of the next month could significantly increase your closing costs. For instance, on a $300,000 home loan, this could mean an additional $1,500 in daily interest.
Benefits of Early Month Closings
Closing during the first weeks of the month offers certain advantages. For example, if you close on June 5, your first mortgage payment won’t be due until August 1, giving you nearly two months before your first payment. Also, try to close on a Tuesday or Wednesday. This way unexpected issues could be resolved within a day or so, not creating as large of an inconvenience.
Optimal Months for Closing: October and November
To minimize closing costs, consider closing at the end of October or during November. This timing is beneficial because of the way escrow accounts for homeowners’ insurance and property taxes are managed.
Key Points to Understand:
- Escrow Accounts: Most mortgages include an escrow account where the lender collects your homeowners’ insurance and property taxes to ensure timely payments.
- Property Taxes: In Georgia, property taxes are due in October, and in South Carolina, they are due in January. Closing in October or November allows the lender to build your escrow account gradually, reducing the immediate funds required at closing.
Closing earlier in the year, such as in July, August, or September, means the lender must collect enough funds upfront to cover an entire year’s worth of property taxes shortly after closing. This can significantly increase your prepaid expenses, adding a considerable burden at the closing table.
By considering these factors, you can choose a closing date that aligns with your financial goals and logistical needs, ensuring a smoother and more cost-effective transition into your new home.
For more information, visit Shawna’s Thought Leader page HERE.
Shawna Woodward
130 North Belair Road
Evans, GA 30809
Phone: (706) 993-1133 or (706) 399-8707
Website: https://www.mhpaugusta.com/
