Closing day has arrived. You are ready to take occupancy of your new home. What happens at the closing table though? What documents will you sign, and what fees will you have to pay?
Closing day is an exciting time; you are a step closing to getting the keys to your new home, after all. However, it is also normal for buyers to be nervous about this day. After all, you'll sign what feels like a mountain of paperwork. You'll also officially assume your mortgage loan, one of the largest loans that you are likely to take out during your life.
Fortunately, with a bit of research into how the closing process works, you can leave behind much of the anxiety before you start signing those documents.
Who will attend
Closings are usually held at the offices of your title insurance company. Those at the closing will be you, of course, and maybe the home sellers and their real estate agent, though sellers are not required to attend the closing.
Also in attendance will be a closing agent, usually an employee of the title company, who will run the closing. Both you and the sellers might also have a real estate attorney at the table, a professional who can look over documents and answer any legal questions.
A representative from your mortgage lender will be at the closing, and usually your real estate agent will also attend.
What to bring
You'll need to bring some key documents to the closing table, including some form of photo identification. Most buyers bring their driver's licenses, but a state-issued identification card is acceptable, too.
You'll also need to bring copies of your homeowner's insurance policy and any other types of insurance -- such as flood insurance -- that you are required to purchase.
After signing the documents that officially transfer ownership of the home to you, you'll need to pay for closing and escrow costs. To do this, you'll need to bring a cashier's check, not a personal check. You should know before closing exactly how much you'll need to pay in fees. You can find this number on the HUD-1 Settlement Statement that lists closing fees and other charges.
Much of the closing process will be taken up with you signing documents. These documents are important; they make the transfer of ownership from the sellers to you official. It is important, then, to know what you are signing. If you have any questions about any documents, make sure to ask your real estate attorney, real estate agent or lender.
Here are some of the documents that you'll receive, and sign, during the closing process:
HUD-1 Settlement Statement: This statement outlines a complete list of all the costs involved in the purchase of your home. These costs might include title insurance, any origination fees charged by your lender and the cost of checking your credit score. Both you and the seller sign this list.
It is important to review the HUD-1 Settlement Statement carefully before signing it. By law, you must receive a copy of this statement at least 24 hours before your closing date. This gives you time to compare the statement with the Good-Faith Estimate that your lender earlier provided you. The actual fees on your HUD-1 statement and the estimated ones on the Good-Faith Estimate can vary slightly. However, you should be concerned if you notice big differences between the two documents.
Truth-in-Lending Statement: The Truth-in-Lending statement contains important information about the cost of your mortgage loan. This statement will list your loan's annual percentage rate -- not the same as your mortgage interest rate -- or cost of credit. This rate includes not only your mortgage interest rate, but also any prepaid finance charges paid during or before the loan's closing and any fees for private mortgage insurance. The annual percentage rate is always higher than your mortgage interest rate.
This statement also lists the total loan amount and the number, date and amount of your monthly mortgage payments. Again, study this document carefully before signing it.
Mortgage Note: When you sign this document, you are promising to repay your mortgage loan. It also spells out exactly what actions your lender can take if you fail to make your monthly mortgage payments on time, such as foreclosing on your home.
Mortgage or Deed of Trust: This document is similar to the mortgage note. It provides your mortgage lender with a claim against the home if you fail to follow the terms of the mortgage note. In other words, if you do not make your payments, this document gives your lender the right to take back your home and eventually sell it.
After the documents are signed
Once you sign the closing documents, it is time to pay your closing costs with your certified cashier's check. If there is a discrepancy between this check's amount and the final closing and settlement costs, you can often make up the difference -- depending upon its size -- with a personal check.
Upon acceptance of payment, you are officially a homeowner. The home sellers or their real estate agent or representative should provide you with the keys to your new home. Now comes the fun part; driving to your new house as its official owner.
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