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Real Estate

2006-11-01 08:56:00

Understanding closing on a home

I don’t understand the process of closing on a home?

ANSWER: This is the day you close on your new home! All parties will sign the papers officially closing the deal, and ownership of the property will be transferred to you. But, the day before closing, you’ll want to be sure to gather together all of the paperwork you have received throughout your home-buying process. This should include some or all of the following documents. A good faith estimate, a purchase contract, proof of title search, and, if necessary, a flood certification, as well as your proof of homeowners and private mortgage insurance, a home appraisal and your inspection reports. You may possibly need to refer to some of these documents at closing. Most home purchase contracts entitle you to a final walk-through inspection of the property 24 hours before closing. This is to ensure that the seller has vacated the property, and left it in the condition specified in the sales contract. If there are any major problems, you can ask to delay the closing long enough to get those resolved, or request that the seller deposit an amount of money into an escrow account to cover the estimated cost of the necessary repairs. At closing, your participation will be twofold: First, you’ll sign all of the legal documents required for the closing. These will fall into two categories. The agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully as you sign them, and do not sign forms with blank lines or spaces. Secondly, you’ll pay closing costs and escrow items, in the event that an escrow is required by the lender. Borrowers handle the numerous fees associated with obtaining a mortgage and transferring property ownership in one of two ways. They either roll them into the principal balance of the new loan, and pay little or nothing down, or agree to pay these out-of-pocket fees at closing. Although closing procedures vary from state to state (and even county to county), the parties generally present at the closing or settlement meeting are the closing agent, who generally works for the Title Company closing the deal…sometimes a party will want to have his or her attorney accompany them to the closing table. Sometimes the closing agent is also an attorney representing one of the parties to the closing. Both sides may have an attorney present if they desire. The title company representative will be there to provide the written evidence of the ownership, and/or chain of title to the subject property. The home seller and his/her real estate agent will be present. The borrower, which is you, your realtor, and the Mortgagee, which is the lender’s representative. The closing agent conducts the settlement meeting and makes sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed. At this point, you will receive some important documents. The HUD-1 settlement statement, which is a detailed list of all costs related to the sale of the home. Both you and the seller (who may be paying some of the closing costs) will sign it. Borrowers should compare their HUD-1 statements against their original good faith estimate to see if the actual closing costs differ significantly from the closing costs estimated by their lender earlier. The final TILA (truth-in-lending-act) statement looks familiar. You received the first version of this statement after applying for your mortgage. This final version outlines the cost of your loan and APR (annual percentage rate) and takes into account any modifications made to your rate, points, etc., between application and closing. Make sure that everything is in order. The mortgage note, which is a document that states your promise to repay the mortgage, indicates the amount and terms of the loan, and what the lender can do if you fail to make the required monthly payments in a timely manner. A Mortgage or Deed of Trust is a document that secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note. A Certificate of Occupancy is needed if you are buying a newly constructed house, because you’ll need this legal document to move in. Once you’ve reviewed and signed all closing documents, the house keys are yours and you will have successfully purchased your new home! Open the front door, and move right in! More next month…