topic Re: Best time of the month to close? in Mortgage Loans

Best time of the month to close?

kentucky_golfer — Thu, 24 Jan 2013 18:47:14 GMT

I'm scheduled to close next Thursday the 31st, however it's not written in stone because the lender is waiting on an updated pest inspection report, which they should be receiving today. Loan officer said if they receive it today, then we should make closing on Thursday.

I know if we close on Jan. 31st my first payment will be due March 1s, and if we close, say, Feb. 1, the first payment won't be due until April 1st. In that regard, it might be better to push closing until Feb. 1st. However, my question deals with the daily interest. Would I be paying more in daily interest at closing if I closed on Feb. 1st than if I closed on Jan. 31st?

I have a hard time understanding how the daily interest works, so I'm just wondering which would be easier on my pocketbook at the closing table.

Re: Best time of the month to close?

cclee — Thu, 24 Jan 2013 18:56:51 GMT

You want to close on the 31st if you are wanting to bring less cash to the table on closing day.

Re: Best time of the month to close?

tooleman694 — Thu, 24 Jan 2013 19:04:35 GMT

Im closing on the 2nd to give me some room till the next payment.

Re: Best time of the month to close?

kentucky_golfer — Thu, 24 Jan 2013 19:27:56 GMT

@cclee wrote:
You want to close on the 31st if you are wanting to bring less cash to the table on closing day.

That's what I figured. I guess it's a toss up on whether I want to bring less cash to closing, or wait another month before my first payment is due. I'm inclined just to let the cards fall however they may.

Re: Best time of the month to close?

tooleman694 — Thu, 24 Jan 2013 20:55:03 GMT

I like the early month closing, because I know my Wife will be telling me we need this and that for the house and having a nice gap in the payment will help.

Re: Best time of the month to close?

Anonymous — Thu, 24 Jan 2013 22:17:29 GMT

Yep. Closing at the end of the month is best. Our tentative closing date is Jan 30th! :-)

You pay your mortgage in arrears, which means you pay your previous month, the next month. So if you close on the 2nd of February, your first mortgage payment would be due April 1st and paid towards the time you spent using the loan for your house in March. Well what about Feb 2-28? You pay interest for the loan for those days and that interest is due a closing. The more days in a month that are left over after closing, the more interest you have to pay at closing.

Re: Best time of the month to close?

Anonymous — Thu, 24 Jan 2013 22:22:48 GMT

+1 on what tooleman said. The one plus of closing at the beginning of the month is you have more time to get settled in your new home before the first mortgage is due. But that extra time is still paid for through the additional interest at closing, but it does provide that extra time that many homeowners appreciate.

Re: Best time of the month to close?

beb86 — Fri, 25 Jan 2013 05:34:16 GMT

The end of the month is good to for property taxes that are prorated and any kind of HoA dues

Re: Best time of the month to close?

StartingOver10 — Fri, 25 Jan 2013 13:00:44 GMT

If you are a seller, you don't want to leave it to the last moment to close if you have an FHA loan. The reason is this: if you close the last day of the month, the buyers funds are then disbursed to your existing lender within 24 hrs. which is the first of the next month. So in your payoff you end up having to pay an entire months worth of interest for that following month even though you closed the day before. This is because FHA won't prorate the last month. They are the only type of loan that won't pro-rate the last month so if you have any other type of loan, it is not a factor. So, if you have an existing FHA loan, allow enough time to close AND enough time to have the proceeds sent to your lender for payoff and processing your payoff. Allow at least a couple of working days after your closing.

For the buyer, as pointed out above there are pros and cons to closing early in the month and late in the month. Personally, I prefer to close early in the month (First or Second week) and to close mid-week (Tues/Wed/Thursday) rather than a Monday or a Friday. In most title companies Monday's and Friday's are crazy busy so the chance for error increases.

Re: Best time of the month to close?

Anonymous — Fri, 25 Jan 2013 20:02:41 GMT

Thanks for sharing the seller's point of view if they have an FHA loan. That helps me understand the best plan of attack if I ever do sell my home.