Mortgage Closing Procedures

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The final step to buying a house is the closing.
The final step to buying a house is the closing.

The mortgage closing, or settlement, is the final step to home ownership. The people present at a closing meeting include the buyer, the seller, closing and real estate agents, representatives for the lender and title agent, and attorneys representing any party. Closing gives all interested parties the ability to look over and confirm agreements as well as hammer out last-minute deals. Although there are variations in closing procedures depending on lender, state and type of mortgage, the basic process remains the same.

  1. Gather Paperwork

    • The paperwork you need to bring to closing varies depending on the lender and state. According to Preferred Consumer, such documentation will likely include proof of homeowners, flood, title and private mortgage insurance; inspection and appraisal reports; and a good-faith estimate of total mortgage costs, including closings costs. Although these are common required documents, your lender will supply you with a more detailed list of documentation. You will need to refer to these documents to make sure the paperwork presented at closing is accurate. You should take the original copies to the meeting but also make a few copies for yourself and others present at the meeting.

    Inspection

    • A day or two before the closing meeting, the seller will usually allow you to inspect the property, according to Bankrate. This inspection ensures the property is in good shape and unoccupied. If there are problems with the property, you have the right to delay closing until the issues are fixed. Alternatively, you can request that the seller place money in an escrow account to pay for repairs. Although you can perform the inspection on your own, Preferred Consumer suggests taking a real estate professional, such as a real estate agent, with you to point out problems you may miss.

    Signing the Documents

    • You will have to sign agreements with both your lender and the seller to complete closing. These documents vary by location and lender, according to Preferred Consumer. Lender agreements generally include a truth-in-lending statement that details the interest and other terms of the loan; the mortgage note which provides proof of the loan amount, length and default penalties; and the deed of trust which gives the lender the legal right to seize the property if you default. Documents that pertain to the seller include the HUD-1 settlement statement which provides information on the entire transaction. Details such as the sales price, loan amount, taxes, fees and payments due to real estate and title agents are included. Both the seller and the buyer must sign this document and the lender will retain a copy. You and the seller will also sign title and deed documents to officially transfer ownership of the property.

    Paying Closing Costs

    • Closing costs are typically 2 to 7 percent of the mortgage amount, according to Freddie Mac. Generally, you will have to pay fees such as application, underwriting, inspection and appraisal fees as well as any points--usually 1 percent of the loan--you agreed to pay in return for a lower interest rate. Your lender may also require you to prepay the first two months interest and homeowner's insurance. Some lenders require you to have the funds for closing in an escrow account before the meeting. However, Bankrate states you may be able to roll the closing costs into the loan or get the seller to pay some or all of the closing fees.

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  • Photo Credit brick home entrance image by Donald Joski from Fotolia.com

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