Our Closing Process
Buying a house is an exciting time and the more you know about the process, the more relaxed you'll be going through it. The Closing consists of the final steps to sealing the deal on the purchase of your new home.
The Steps to Closing include:
• The Offer
• The Deposit
• Contingencies
• Home Inspection
• The Contract
• Settlement Sheet
• Closing Documentation
• Closing Costs
• Final Arrangements
• Settlement
The Offer
Make an Offer that’s 8-10 percent lower then the asking price. This allows you to be able to negotiate and not go over the maximum amount you can afford.
The Deposit
Also known as Earnest Money, and is used to display a commitment to the seller from the buyer. The real estate agent or the seller’s lawyer holds on to the deposit in trust until the deal closes. If you decide not to close once the offer has been accepted then you maybe sued for damages and lose your deposit.
Contingencies
These are certain requirements specified in a contract that need to be met before the buyer is required to close. Typical among them: the buyer's securing of financing and an acceptable house inspection. Generally speaking, an inspection contingency covers a 10-to-14-day period from the acceptance of the contract, and financing contingencies run for 30 days. But in a seller's market, buyers may be asked to fulfill their contingency requirements in shorter time frames.
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Home Inspection
In a home inspection, a professional conducts a thorough examination of a property to assess its structural and mechanical condition. The idea here is that a trained home inspector will be able to catch potential problems that a buyer might not detect.
The Contract
This follows the acceptance of an offer by the seller, and it is a legal and binding obligation, on the part of the buyer, to purchase the property if any contingencies are met. It outlines the details of the transaction, including: a description of the property, the selling price, the date of closing, the possession date and any applicable contingencies.
Settlement Sheet
Also called a "closing statement" or a "settlement statement," this is a document that the Department of Housing and Urban Development requires to account for all financial aspects surrounding the sale and purchase of a home. It provides an enumerated list of the funds that were paid at closing. Items on the statement include real estate commissions and initial escrow amounts (money or securities deposited with a neutral third party - the escrow agent - to be delivered upon fulfillment of certain conditions). The Real Estate Settlement Procedures Act requires that a copy of the settlement sheet be distributed to both parties at least one day prior to settlement.
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Closing Documentation
Before you can close on a house, some paperwork must be completed. This includes a title search to make sure the title is clear, title insurance to protect the buyer and the lender from an oversight regarding a claim on some aspect of the property and an application for homeowner's insurance (necessary for securing a mortgage).
Closing Costs
The total amount of closing costs varies, but may include:
• a loan origination fee
• an appraisal fee
• the cost of a credit report
• a lender's inspection fee
• the cost of title insurance
• a mortgage broker fee
• property taxes
• fee for document preparation.
Your lender is required to give you prior notice of fees associated with your loan.
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Final Arrangements
Before the deal is closed and you take possession, you must make some practical arrangements regarding utility service and first mortgage payment.
Settlement
Settlement describes the payment of the balance of the purchase price the buyer owes on the property, and the transfer of the title. It takes place on the possession date specified in the agreement.
Closing Questions & Answers |
• WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN?
• WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?
• WHAT MAKES UP CLOSING COSTS?
• WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
• WHAT DO I GET AT CLOSING?
WHAT HAPPENS AFTER I'VE APPLIED FOR MY LOAN?
It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you'll be able to move into your new home.
WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH?
This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller's responsibility to fix them.
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WHAT MAKES UP CLOSING COSTS?
There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:
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Attorney's or escrow fees (Yours and your lender's if applicable) |
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Property taxes (to cover tax period to date) |
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Interest (paid from date of closing to 30 days before first monthly payment) |
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Loan Origination fee (covers lenders administrative cost) |
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Recording fees |
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Survey fee |
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First premium of mortgage Insurance (if applicable) |
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Title Insurance (yours and lender's) |
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Loan discount points |
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First payment to escrow account for future real estate taxes and insurance |
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Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable) |
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Any documentation preparation fees |
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WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY?
You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.
Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You'll pay the lender's agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.
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WHAT DO I GET AT CLOSING?
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Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing) |
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Truth-in-Lending Statement |
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Mortgage Note |
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Mortgage or Deed of Trust |
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Binding Sales Contract (prepared by the seller; your lawyer should review it) |
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Keys to your new home |
Source: HUD, Yahoo
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