Closing on a home loan is a very exciting and anxious time for most homeowners. It is the beginning of life in your new home and a significant milestone. Many people don’t consider the implications a particular date will make on their home closing. Read below to find out how your closing date will impact you and your finances.
It is important to be realistic about your closing date when signing your sales contract. A good rule of thumb is to schedule the closing date no less than 30 days after the sales contract is ratified. This will allow you to get all of your financing in order and give the escrow process a reasonable period of time. If you do not close by the date listed on your sales contract due to a hang up on your end, you can be obligated to pay a per diem amount for each business day beyond that date.
Per Diem Interest
Most people choose to close on their home loan at the end of the month in order to pay less in interest. The interest that you pay each month with your mortgage payment is in arrears. That means your mortgage payment for April pays the interest for the month of March. Therefore, when you close on your loan you need to pay the interest through the beginning of the next month. If you close at the end of the month you will pay less in interest, but if you close at the beginning of the month, you’ll pay much more.
Actual Closing Date
The most common days to close on a mortgage loan is on a Friday or the last business day of the month. The National Association of Realtors did a study to calculate the most popular closing dates in 2014. They found that the top 7 closing days were the last business days of June, May, August, April, July, September, and February. Out of the following 18 most popular days, all were on Friday except for three dates which were all at the end of the month.
Lenders always have a push to close more loans at the end of a month or quarter. This can either help or hurt your chances of closing on time. Your mortgage professional may be on fire to get your loan closed to meet their monthly/ quarterly goals. They may pull out all the stops to ensure that your loan closes on time. On the flip side, you may face a bottleneck in the mortgage process if something arises at the last minute. Due to the volume of loans set to close you may have to wait longer for a response from underwriting.