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Tuesday 09/26/2017 Mortgage Rates

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Closing on a House

This article is going to explain how the closing of a mortgage takes place, what the roles are for those who contribute, what paperwork needs to be prepared, and what the finalizing documents of property ownership and mortgage lending mean. The documents you need to prepare in the weeks leading up to, the day of, and everyone involved on closing day will be explained below.

Who is involved in the weeks leading up to closing

Every one of the following individuals is contributing to the closing process in their own way. Let's detail the roles that each is supposed to be playing to make closing as smooth as possible.

  • The closing agent is a third-party affiliate who will be informed by the lender to "referee" the transferring of ownership on the property. They know where all the information you need regarding the property can be retrieved and will help speed up the process of closing.
  • The title company's job is to confirm the ownership rights to the home.
  • The escrow agent is there to receive the loan documents from your lender.
  • The seller is taking care of any final adjustments (inspections, removals, add-ons, cleaning, etc.) you both agreed on that need to be done to the home. 
  • The buyer (you) is preparing all the necessary paperwork that they need to bring on the day of closing. Paying for lender protection, such as with an insurance policy, needs to be taken care of before the closing date.
  • The real estate agent is the middle man connecting all the above contributors, making sure that everybody knows where and when the meeting will take place.

What to bring to the closing table

  • Cashier's or certified check.
    As imposed by federal law, the lender is required to tell you how much you're supposed to pay on the day of closing. A Closing Disclosure statement, which details the costs to which you're obligated, will be given to you a few days before closing. The "closing day" section of the statement will outline a number of funds - the down payment and closing costs - that you're supposed to hand in on the day of. Cash or personal checks won't be accepted.
  • Identification.
    The escrow agent needs to know that you're the person you say you are. Any photo ID will do. 
  • Your attorney.
    They will help you understand anything you missed in terms of the legal terminology and language.
  • The sales contract.
    This is just to have on hand whenever you want to confirm a detail regarding the property in question.
  • Proof of insurance.
    Some lenders require that the expiration date on these be a year from the date of the transaction.

The two sets of documents you receive when closing

There are two types of documents you will receive upon closing, the first is related to transferring ownership of the home itself while the second set is reserved for the mortgage transaction.

1. Property Related Closing Documents:

  • HUD-1 Settlement form: It separates the costs on the seller from the costs of the buyer.
  • Certificate of Occupancy: If the house is a new construction, you can't move in without this certificate.
  • Abstract of Title: This is a recorded list of all title-affiliated documents.
  • Declaration of Reports: This includes the buyer's signature on all inspections done on the house. 
  • Proration papers: Based on previous agreements, these papers show how the buyer and seller are sharing the costs of current utility bills, property taxes, and other costs.
  • Warranty deed or title: This paper shows the transferring of property rights from the seller to the buyer.

2. Mortgage Related Closing Documents:

  • Promissory note: You signature on this note confirms that you've complied with the promise of paying back the loan amount.
  • Mortgage or deed of trust: This gives your lender proprietary rights against your home in the case that you default or fail to pay back the loan.
  • Truth in Lending statement: Sometimes referred to as Regulation Z, this statement shows the total sum you will owe (plus interest), the life of the loan, and its annual percentage rate (APR).
  • Monthly payment letter: A more detailed variation to the "truth in lending" statement, this letter shows how your monthly payments will be allocated towards interest, insurance premiums, and the original loan amount covering the mortgage.

Once you sign and make known to everyone present that you understand the lender's rights, the seller's rights and your rights as a buyer, the keys to your new home are yours!

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