How to Choose the Right Closing Date on a New Home

What you need to know about setting a date that works for you and might save you money.

In all the excitement of buying a brand new home, things can get busy, and fast—it's easy to miss some of the nuances that can help save you money and stress. One of those overlooked decisions is setting the ideal closing date.

Give Yourself Time

You'll need enough time to complete the closing process. Generally speaking, most closings are scheduled within 30 to 45 days of an offer being accepted.

If you have a deadline, such as the end of a lease or movers arriving, be sure to set your closing date for at least two weeks before that deadline. Sometimes lender approval can be delayed, causing the need for both the buyer and seller to agree to a new closing date, so you want to create a cushion of time just in case.

Make sure the closing date is set so that you have enough time to lock in your interest rate. Lenders will typically lock, or hold, your approved interest rate for 30 to 60 days, but be sure you're clear on exactly how long your rate is good for, and that your closing falls within that window. You can sometimes extend a lock on a mortgage rate, but typically that requires a fee.

Understand the Math

Certain closing dates are more advantageous because of how your first mortgage payments are calculated.

In most cases, it's best to close at the end of the month. Why? It has to do with when your first mortgage payment is due.

Your first mortgage payment is due on the first day of the second month after you close.

Unlike your rent, mortgage payments are paid in "arrears," meaning you pay that month's payment at the end of the month, not the beginning.

You do not pay the mortgage for the month when you close; however, you do pay interest, because interest starts accruing on the day you close. So closing toward the end of the month could save you several hundred dollars in interest payments.

Watch Out for Delays

As you go through the closing process, understand most of the time things go very smoothly toward an on-time closing date. However, there can be some delays to watch out for, including:

• Problems with the appraisal/the appraisal is too low
• Issues with insurance/the home is not insurable
• Issues with title/not a clear title
• Home inspection reveals defects or major issues

Most delays in closing are resolvable, but they can create hiccups in the schedule and take a little extra time.

Ultimately, choosing the right closing date means taking into account your unique situation, any deadlines you have, any considerations about the home itself or the loan, and aiming for a time that is to your advantage financially by costing you the least amount of interest payment. Every loan and every sale is different, and a skilled mortgage professional and realtor can help you determine the best timeline.