REGION – Purchasing a house is an exciting endeavor, and it doesn’t have to be a stressful one. Choosing a good realtor, lender, and attorney to assist you through the process can smooth out a lot of the bumps, and allow you to focus on your future plans while your team keeps the process moving forward. I highly recommend working with local lenders who are familiar with Vermont real estate transactions and property taxes. Vermont recently passed some major changes to our property transfer tax, which was reduced for home buyers looking for a primary residence, but be mindful it actually increased substantially if you are purchasing a second home.
Here are some suggested do’s and don’ts for a successful closing. Do keep your attorney aware of any changes to the deal as it progresses, sometimes there are price reductions following an inspection, or the parties decide to close sooner or later than originally planned, and it is important the attorney is aware. Don’t make any major purchases right before your closing. A new car loan may negatively impact your credit score or impact your debt-to-income ratio in a way that prevents your home loan from getting approved. Don’t plan to rely on money from friends or family to come up with the downpayment on your house. Your lender will verify the source of the funds used to put money down. You’d need specific advanced approval to utilize any gifted funds, so make sure you discuss it with your lender and attorney if it is part of your plan.
Do consider seller credits. When you purchase a home there are a number of expenses that get paid at closing, including homeowner’s insurance for the next year, the cost of the heating fuel currently in the tank, a portion of the upcoming property taxes, your appraisal, lender fees, recording costs, and the Vermont Transfer Tax, among other costs. In most cases, assuming the appraised value of the property is sufficient, you can arrange the purchase so that the seller will give you a credit out of the purchase price to assist with your purchaser’s closing costs. For example, if you have an agreement to buy a property for $100,000, but want to preserve a little of your cash on hand, you can suggest a purchase price of $105,000, with the seller giving you a $5,000 credit towards your closing costs. This can allow you to utilize less of your cash on hand to fund the closing, and instead utilize funds you are borrowing from your bank.
Do remember to contact the power company and set up an account with them so you don’t have any disruption in power. Do obtain homeowner’s insurance in advance of the closing, so they can have your insurance begin as soon as you own the property.
Do make sure you have all your closing funds accessible in time to close. Selling stocks, moving funds between different banks can require time for transactions to clear and allow the funds to be available. Plan on being able to provide a bank check to your attorney days before the closing, so your attorney has cleared funds in time to close. In most instances you will need to bring two forms of ID to closing, so as you pack up your apartment or house, make sure you keep your social security card, passport, or other form of identification accessible. If you are wiring funds, you need to personally verify the wiring information (not via email) to protect yourself. There are risks in wiring funds, so make sure you discuss the process with your attorney.
Submitted by Ethan B. McNaughton, Esq., Lamb & McNaughton P.C., Springfield, Vt.