Closing on a home loan can be exciting and stressful, especially for first homes. Here’s a guide that will help you get ready and relax during the closing.
Who Will Attend
During the closing, the seller, buyer, realtors for both seller and buyer, and the representative for the title company may attend.
What Happens During Closing
Here’s what will happen:
1. All loan documents and closing costs will be explained in detail and then signed. If any numbers are different then what you agreed to don’t sign. Contact your lender to explain.
2. Evidence will be provided for the required inspections and homeowner’s insurance.
3. Buyer will cover closing costs and down payment with a cashier or certified check.
4. Lender will submit funds for the amount of the home loan to closing agent.
5. An escrow account will be started by your lender so you can pay for property taxes, homeowner’s insurance and possibly, your monthly loan payment.
6. The house keys will be given to you, the new homeowner.
Closing Costs
Closing costs are typically 3% of the loan and include loan origination fees, county taxes, recording charges, appraisal and attorney’s costs.
Documents To Sign
The following four documents are typically reviewed and signed:
1. Mortgage Or Deed Of Trust
These papers show the lien on the property as security for repayment of the mortgage loan. Basically, the documents state that if payments are not made, then the lender has the right to foreclose, takeover home ownership and seize the property.
2. HUD-1 Settlement Statement
According to contract terms, this statement provides a detailed list of the final remaining credits and fees for the seller and the buyer.
3. Promissory Note
This is a legal “IUO” note that represents your promise to pay your lender as agreed in accordance with the loan’s terms. It contains the loan payment dates and the address where to send the payments.
4. Taxes, Insurance And Interest
This requests prepayment for interest on the loan, along with a prorated amount for homeowner’s insurance and property taxes, to cover the time between the date of the closing to the time of your first monthly payment.
