When Is the Best Time of the Month to Close?

There really is no best time to close, and if you are purchasing a home rather than refinancing one, the closing date will have to be worked out with the seller, and they normally get preference, as they may be timing the transaction with you to coincide with another transaction or activity, such as buying the next house they’re moving into.

The day of the month you close will, though, impact how much money you will need to take to closing. If you close earlier in the month, you’ll generally need more money to close the deal than you will at the end of the month.

This is largely because of mortgage interest costs. Let’s take a simple example. If the interest you pay on your mortgage, at least initially, comes out to $1,000 per month and you close in the middle of the month, say, on September 15, the lender will want $500 in what is called prepaid interest.

This is to cover the interest from September 15 through September 30. Then your first payment will be due November 1.

For that November 1 payment, you’ll pay the interest (and principal) for the period of October 1 through October 31. This is called paying in arrears or paying interest for a month at the end of that month, and it is how mortgage payments work.

The other thing to consider with regard to when to close is property tax payments. Different taxing bodies, namely counties, collect taxes at different times of the year in what are called installments.

These could, for example, be collected in June and September, with half of the annual tax bill due in each installment. Certain months will require less at closing than others.

A number of factors go into deciding when is the best time to close. I would be happy to go over them with you and help you make the decision that’s best for you. I’m always here to help. You can reach me by phone and by email.

Is There a Best Time to Lock in an Interest Rate for a Mortgage?

This is a really good question and one that nobody, including your lender, would be able to give you a definitive answer to. Mortgage rates are based on what the market as a whole is doing.

In the typical day-to-day operations of the market, fluctuation is normal. And since this fluctuation is expected, nobody can predict what it will do from one day to the next.

In nontypical times, such as when major events happen, both here and in other parts of the world, they can impact our economy and, hence, mortgage rates.

Tying this information into the original question of when you should lock in your mortgage rate, the answer typically is at the end of the process, meaning when you are close to your closing date.

In fact, many lenders will allow you to lock in an interest rate only after they have approved all of your documentation and have seen a completed appraisal on the property. So why is this?

Because it costs lenders money to set aside funds that they intend to lend to a buyer. If they lock your rate too soon and there are challenges down the road that cause the deal to either stall or end completely, they will still incur these costs.

Things that cause this to happen include problems with the accuracy of information that the buyer provided or issues with the property itself or even the seller.

I’m here to help, and I’m just a call or email away. Please let me know if I can answer any questions you have about locking in your interest rate and how any of this works.