How to Chose your Closing Date
Every borrower’s situation is unique. And we are not just talking about the big differences like a purchase versus refinance. Seemingly minute factors, such as your closing date, are decisions to be made carefully so you can get the most out of your mortgage.
Beware the Rule-of-Thumb
Real estate professionals often use rules-of-thumb to make the buying process smoother. While this is absolutely appropriate for some things, we as mortgage experts do not consider closing dates to be a rule-of-thumb kind of thing. Consider the best-fit situations below before you say yes to “Most of my clients…”
Early in the Month
If closing costs are particularly high, take comfort in the fact that you have two months to recover when closing early in the month. This especially applies to first-time buyers, who may have less than existing owners to bring to closing and while leaving enough for reserves.
Closing early in the month gives borrowers the benefit of two whole mortgage-free months. And the proposition of living in a house payment-free for a couple of months likely sounds attractive to most people. The small downside to an early closing date is paying the per diem interest accrued between closing and the first payment. In many cases, however, saving two months’ worth of payments offsets the higher interest bill.
Closing on the 15th or 16th of the month is a good compromise. It allows buyers a slightly lower interest bill while living in the house for 1 ½ months payment free.
Sometimes borrowers go mid-month simply because they cannot decide: interest savings or fewer payments? Sellers often decide on mid-month to give themselves a cushion between closing early in the month on their new house and the sale of their existing home. In this instance, of course, buyers do not have much choice. Similarly, if there is a holiday toward the end of the month, the best way to prevent road bumps in the closing process is by choosing mid- or early in the month.
End of the Month
The main advantage to closing at the end of the month is minimizing the interest bill. This is also popular among first-time buyers, who skip a partial rent payment by moving out at the end of the month.
Unless borrowers are staunchly against a higher interest bill or fit into the first-time buyer profile described above, an end of the month closing date is not recommended. First, it means an additional mortgage payment. Second, it opens the door to potentially stressful situations. No industry nor organization is immune to the craziness that comes at the end of the month. Many closers and title representatives will tell you that closing docs tend to arrive later in the day, causing buyers and their team to become a little unnerved.
When is the Best Time to Close?
There is no “best” closing date that applies to every situation. We can say, however, that end of the month is perhaps one of the worst times to close because it puts you at risk of having a less-than-perfect experience. (No matter how dedicated the lender and title company are to excellent service.) Besides, early and mid-month closings present more advantages to a greater population of buyers.
Before accepting a rule-of-thumb recommendation, call your local mortgage expert at UHL. We’ll do what we do best: examine every option to help our clients make the most informed decision.