The closing is the final step in the home-buying process. It is the day when you conclude a real estate transaction and transfer the last funds and keys. After the closing, you’ll be the proud owner of a new house.
What to Expect During the Closing Process
The majority of closings consist of two steps: the acquisition of real estate and the closing of the mortgage loan utilized to purchase that real estate. Deeds, mortgages, and other relevant paperwork will be signed or provided to complete these two steps. An escrow agent will conduct the closing, acting as a neutral third party who retains the legal documents and monies for the buyer, seller, and, in some cases, a lender. The agent will verify that the relevant documents and funds are distributed in accordance with lender instructions, and that both the seller and the buyer fulfill their contractual obligations.
What should I bring to the closing ceremony?
- Two kinds of identification are required.
A government-issued ID with a photo, such as a driver’s license or passport, is required.
A Social Security card, credit/debit card, insurance card, wholesale membership card, library card, and so on must all have your name printed on them.
- Certified Funds (cashier’s check) made out to the closing firm.
It is also acceptable to wire funds straight to the closing company’s escrow account.
For wiring instructions, please contact your settlement agent.
- All loan parties (and their spouses) must be present to sign the relevant loan agreements.
How long will it take to close?
The average closing time for a sale transaction is one hour, and for a refinance transaction is 30 minutes, however this might vary. Closing on a home is a life-changing occasion; you’ll be a new homeowner or have a new home at the end of it. This isn’t something you should try to finish during your lunch hour. Make sure you have enough time to devote to this meeting in case things don’t go as planned and you need to extend it.
Explaining Closing Costs
Buying a house entails a number of expenses. Here’s a rundown of some of the most typical charges.
The fee charged by the lender and any mortgage broker to the borrower for obtaining a mortgage loan.
Taking and processing your loan application, underwriting and funding the loan, and other administrative services are all part of the origination process.
Points are a proportion of a loan’s total amount.
When a loan officer talks about one point on a $100,000 loan, he or she is referring to one percent of the loan, or $1,000. Lenders charge various interest rates for loans with various points.
You have three major options when it comes to points. You have the option of not paying or receiving points at all.
This is a no-interest loan. To get a reduced interest rate, you might pay points at closing. You can also elect to have points paid to you (also known as lender credits) and use them to offset some of your closing costs.
Underwriting: This fee is paid to the lender to cover the expense of determining whether or not to approve you for a loan.
Appraisal: This payment covers the cost of an appraiser’s report.
Credit report: The cost of a credit report, which discloses your credit history, is covered by this fee.
A credit report is used by the lender to determine whether or not to approve your loan and how much money to provide you.
Flood determination: A fee is paid to a third party to determine whether or not the property is in a flood zone.
If the property is discovered to be in a flood zone, flood insurance will be required.
The insurance is not included in the price.
House inspection: A fee charged to examine the condition of a property and to check for any necessary home repairs before to closing.
Pest inspection: This charge covers inspections of your home for termites or other pest infestations.
A surveyor may be required by the lender to conduct a property survey.
This also serves as a safeguard for the buyer.
The surveyor’s fee is usually paid by the buyer, although it can also be paid by the seller.
Binder for title insurance: A promise to provide a title insurance policy at a later period.
The cost of the lender’s title insurance policy, which protects the lender’s investment.
Owner’s title insurance is the price of a policy that protects a homeowner’s investment for as long as they or their heirs own the property.
Settlement: The settlement agency or escrow holder receives this fee.
The seller and the buyer might agree on who is responsible for paying this fee.
The cost of searching the public records for the property you are acquiring.
Preparation of Final Legal Documents: This price covers the cost of preparing final legal documents such as a mortgage, deed of trust, note, or deed.
Notary: This price covers the cost of having a notary public swear that the people specified in the documents actually signed them.
Attorney fees: In order to draft and record legal paperwork, both the buyer and the seller may hire their own legal counsel.
When an attorney is working as a settlement agent, however, there may only be one person involved in the closure.
Contract negotiations determine who pays for those services.
Recording fees: Depending on your sale agreement with the seller, you or the seller may be responsible for these fees.
The fees for formally documenting the new deed and mortgage are normally paid by the buyer.
Transfer tax: This tax is imposed in some areas anytime property is sold or a mortgage loan is taken out. It can be rather high, and it is established by state and/or local governments.
Tax stamps from the city, county, and/or state may be required.
The cost of homeowner’s insurance is:
This insurance covers both you and the lender in the event of a fire, windstorm, or other natural disaster.
Lenders frequently demand borrowers to bring a paid-up first-year policy to settlement or to pay for the first year’s premium at settlement.
Mortgage insurance premium: At the settlement, the lender may demand you to pay your first year’s mortgage insurance payment or a lump sum premium that covers the life of the loan.
Prepaid interest is money you pay at closing to get your interest paid up until the first of the month.
Property taxes: Typically, six months’ worth of county property taxes are required.
Home warranty: A fee for an insurance policy that protects you from the cost of significant system and appliance failures in your home.
The total monetary amount of the real estate broker’s sales compensation, which is normally paid by the seller, is known as the real estate commission. This commission is usually a percentage of the home’s selling price.