Knowing what to expect brings peace of mind.
I will provide you with the support you need during the home closing process; working closely with Escrow to make sure you have received the proper documentation and you are advised of pending dead-lines well before the fact. I will also coordinate a final property walk-through.
To help you better understand “The Home Closing Process”, I have assembled information from credible sources and placed it areas of information so you can choose among areas that you want to explore at greater depth.
Steps in Closing on Your Home is one of three tabs that also include, How Long Does a Home Closing Take?, and What Problems Can Take Place?
The balance of the answers are in a Frequently Asked Questions format.
As you read documents your are likely to come across words that are unfamiliar to you. Use my page on Loan Terminology for definitions
[tab title=” Steps in Closing On Your Home”]
Depending on where you live, any number of entities can handle the closing process. The closing agent could be an escrow officer, a closer, the title company or a real estate lawyer.
Before any escrow can close all the terms of the purchase contract must be met; then the seller deposits the deed and the buyer deposits the funds. Here are sample types of conditions required in California.
Fully executed purchase agreement and addendums.
Deposit of earnest money deposit.
Home inspection or waiver.
Fulfillment of seller obligations such as submission of pest inspection report and / or completion, home warranty, preliminary title policy, repairs, if any, according to the Request for Repairs.
Completion of buyer inspections, including release of contingencies, if demanded.
Buyer’s final walk-through inspection or waiver.
Appraisal of property by lender’s appraiser.
Lender’s loan approval and satisfaction of loan conditions by buyer such as depositing evidence of a homeowner insurance policy.
Seller’s and Buyer’s signed escrow instructions.
Seller’s signed and notarized deed conveying title.
Buyer’s signed and notarized deed of trust and executed promissory note.
Buyer’s signatures on all loan documents.
Deposit of buyer’s funds from lender.
Deposit of balance of buyer’s down payment and buyer’s closing costs.
By Elizabeth Weintraub, About.com Guide[/tab]
[tab title=”How Long Does a Home Closing Take?”]
Buyers who have received loan pre-approval versus loan pre-qualification are often in a position to close sooner. The pre-approval process involves verification of certain items upfront, before signing the purchase contract, moving the borrower a few steps closer to closing.
If a lender has verified the borrower’s employment, bank accounts and credit report, closing can take place as quickly as underwriters can process the paperwork and review the appraisal, generally within a week or two. However, if a document is missing from the file such as a preliminary title report or a seller’s condition of sale, the closing may be delayed.
Most federally related mortgage loans can close within 30 days. Special first-time home buyer programs, particularly those involving help with the buyer’s down payment, might take 35 to 45 days to close. These special loans typically require approval from two underwriting processes.
By Elizabeth Weintraub, About.com Guide
[tab title=”What Problems Can Take Place?”]
The biggest problems often occur after the file is submitted to the underwriter. Loan officers are generally familiar with underwriting guidelines; however, they can’t always predict an underwriter’s response.
Little is worse for buyers than sitting on boxes containing every valuable they own, waiting for movers and not knowing if their loan will be approved by an underwriter. The last few days of closing can be very suspenseful.
Here are common problems that can delay or prevent closing, many of which, it pains me to say, should have been addressed prior to submission to an underwriter, but sometimes the ball gets dropped:
Low appraisal or the underwriter orders a review appraisal that does not match the first appraisal.
Additional debt found on the buyer’s updated credit report.
Mistakes noted in the buyer’s credit report.
New liens or judgments filed against the buyer or seller upon title update.
Clouds on title.
Marital status change for buyer or seller.
Required updated bank statements or financial documents.
Insurance information missing.
Expired loan or program commitment.
If the purchase contract does not contain a provision that makes closing contingent upon loan approval, the buyer’s earnest money deposit could be at risk if the loan is not approved and the transaction does not close.
Written by my favorite real estate blogger, Elizabeth Weintraub
Its closing day, time to sign the papers officially sealing the purchase.
[faq_question]What Should I Do To Prepare for Closing Day?[/faq_question][faq_answer]The day before closing, be sure to gather all the paperwork you have received throughout the home-buying process: good-faith estimate, contract, proof of title search and insurance if necessary, flood certification, proof of homeowners insurance and mortgage insurance, home appraisal and inspection reports. You might need to refer to these documents at closing. Most home-sale contracts entitle you to a 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.
Original Source: Realtor.com
[faq_question]Do You Have Any Useful Tips?[/faq_question][faq_answer]The closing process can be stressful because of all the paperwork you will need to sign. Just remember these few tips:
Avoid feeling rushed by reading all the documents that will be sent to you prior to this meeting.
Most people ask a lot of questions about the legal terminology in closing documents. Don’t be afraid to ask as many questions as you need to ensure that you clearly understand the process and the paperwork.
The documents in the mortgage process are the same for everybody, regardless of ethnic origin, language, gender, or income. Federal law requires that you sign English language versions of all forms as your final, legally binding contract.
SOURCE: Freddie Mac, Your Step-by-Step Mortgage Guide
[faq_question]What is my Participation at Closing?[/faq_question][faq_answer]At closing, your participation will be twofold:
Sign legal documents.This falls 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 before signing them, and do not sign forms with blank lines or spaces.
Pay closing costs and escrow items.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 or agree to pay higher interest rates and have their lenders foot the bill. Some buyers may have to pay these out-of-pocket fees.
Original Source: Realtor.com
[faq_question]What Documents will I Be Signing?[/faq_question][faq_answer]
HUD-1 settlement statement: A detailed list of all costs related to the sale of the home. It is similar to the good-faith estimate you got weeks earlier, but the HUD-1 is not an estimate; it is a precise record of the settlement costs. Both you and the seller sign it. Compare the HUD-1 statement against the good-faith estimate to see if the actual closing costs differ significantly. By law, you have the right to review the HUD-1 24 hours before closing. Do so. Clear up any mistakes and resolve problems.
Final TILA statement: You received the first version of this statement after applying for your mortgage. This final version outlines the cost of your loan and APR and takes into account any modifications made to your rate and points between application and closing. Make sure that everything is in order.
Mortgage note: This document states your promise to repay the mortgage. It indicates the amount and terms of the loan, and what the lender can do if you fail to make payments.
Mortgage or deed of trust: This document 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. Certificate of occupancy: If you are buying a newly constructed house, you 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 bought your new home!
Original Source: Realtor.com
[faq_question]Can You Give Me More Details About The Documents I Will Be Signing?[/faq_question][faq_answer]
Here’s a little more detail about some of the paperwork you’ll be asked to sign at your closing. Remember, every person who buys a home has to sign this paper- work, no matter the country of origin, income level, or native language.
The Mortgage Note
The mortgage note is a legal document that provides evidence of your indebtedness and your formal promise to repay the mortgage loan, according to the terms you’ve agreed to. These terms include the amount you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment, and the place where the payments are to be sent. The note also explains the consequences of failing to make your monthly mortgage payments.
The Mortgage or Deed of Trust
The mortgage or deed of trust is the security instrument that you give to the lender that protects the lender’s interest in your property. When you sign the mortgage or the deed of trust (depending on the state where you live), you are giving the lender the right to take the property by foreclosure if you fail to pay your mortgage according to the terms you’ve agreed to. Financing a house is very similar to financing an automobile; in both cases the property is the security for the loan.
The mortgage or deed of trust states most of the infor- mation contained in the note. It also establishes your responsibility to keep the house in good repair, insure it, and make your payments on time.
A deed is a document that transfers ownership of the property to you. It contains the names of the previous and new owners and a legal description of the property, and is signed by the person transferring the property. The deed gives you title to the property, but the title is conveyed to a neutral third party (called a trustee) until you pay the mortgage loan in full.
The closing agent will be responsible for recording this document so that it can be filed as part of your county’s public records. You will receive a copy at closing and another copy after it has been recorded.
Affidavits and Declarations
Affidavits and declarations are statements declaring something to be true, like the fact that the property
will be your principal place of residence or that all the repairs needed on the property were completed prior to closing. In most cases you’ll have to sign one or more affidavits at your closing.
SOURCE: Freddie Mac, Your Step-by-Step Mortgage Guide