Buying a home is an exciting venture, whether it’s the first time or the fifth. It takes a certain amount of strategizing, from finding the perfect location to getting your offer accepted. Once approved for your home loan, the last step is to lock in your rate and count the days until your closing date. But when is the best time to close on a home? Is there a certain time that works more to your advantage?
Closing Date Comparisons
It’s largely assumed that closing on the last day or as close to the end of the month as possible is the best choice. However, this isn’t true for all cases. The following compares the benefits and drawbacks of closing at varying times within the month. Keep in mind the date on which you close affects when your first mortgage payment is due.
- Beginning of the Month: Closing early in the month does require that you pay a good deal of interest for the remaining days of the closing month. But it also leaves you almost two full months before making that first mortgage payment. (For example, if you close November 4th, your initial loan payment is due January 1st of the following year.) The benefit is the substantial cost savings you’ll gain by not having to make a mortgage payment for nearly two months.
- Middle of the Month: Closing between the 15th and the end of the month sets your first mortgage payment a full month out. (For instance, if you close between October 15th and October 31st, your first loan payment is due on December 1st.) You must take into consideration the amount of interest you’ll incur and be required to prepay during the closing month.
- End of the Month: Closing towards end of the month ensures the amount of daily accrued interest you pay is minimized (for that month). This can add up to a significant savings in closing costs, when you consider paying interest on one to two days as opposed to 15 or more. Like the middle of the month example, your first mortgage payment would be due a full month out.
Consider the Circumstances
Many people prefer to close at the end of the month, to avoid paying additional interest. But bear in mind that the last few days of the month are the busiest times for lenders and title companies. Loans can often be pushed through more efficiently during slower times. The “funnel-effect” at the end of the month, at times, leads to closing date delays.
You may not have full control over which day your closing actually takes place. Certain factors may cause your closing to be delayed, and even moved into early days of the next month, depending on how the days fall. In such as case, you’ll pay more interest, but have nearly two months before you’re expected to remit your first mortgage payment.
Have questions on the closing process? The Linear Title & Escrow team is always here to help! Contact us today at (757) 340-0340.