Preparing for closing is stressful for both the buyer and seller. The Seller is anxious for the sale to go through, while the Buyer has second thoughts about taking on a large debt. You as the Buyer should keep in mind that once the sales contract and loan commitment letter have been signed and accepted, and you fail to follow the transaction through, you will lose your deposit and face possible litigation (a lawsuit).
Setting the Closing Date
The Lender and your agent may set a tentative Closing Date. The Closing Date is set after the loan has been approved and the Buyer's commitment letter accepted. The Buyer must make sure the closing takes place before the Lender's commitment expires and the Buyer's rate lock expires which is usually either 30, 60, 90 or days.
Securing Title Services
Generally, your attorney, real estate agent or lender will assist you in selecting a title company. Closings may be held at your attorney's office, lender's office, realtor's office, or title company.
The Lender requires a title search for both your protection and theirs. A title search prevents fraudulent sales (i.e., from bad marriages, wayward kids, etc.). It makes sure the seller is the property owner and has the legal right to sell the property. A title search uncovers any encumbrances on the title, such as liens by creditors. These liens must be paid before or at closing.
two types of title insurance policies: Lender's and Owner's. Generally, the Buyer pays the cost of both types of policies; combining both policy types (lender's and owner's) can save money.
Types of Ownership
The names appearing on the deed are generally those whose names that are on the mortgage. There are four types of ownership highlighted below. Examine these closely to better understand the various options that are available for those seeking homeownership. Please contact Collegiate Title Corporation on the options available in your particular state.
Homeowner's warranty is a warranty that protects against certain defects in the home. This kind of warranty is usually offered on new homes, although now it is offered for older homes. The covers the Buyer for major house systems during the first year of ownership.
Final Estimate of Closing Costs
The Lender is required to provide the Buyer with an estimate of closing costs soon after Buyer has filed the application. Estimates are subject to change, and you have the right to review the Settlement Sheet (HUD-1) one business day before closing. The Estimate is sometimes called the Good Faith Estimate. The Buyer is required to pay the remainder of the down payment(minus the deposit) and closing costs with a Cashier's Check. Personal checks are usually not accepted.
Most often, the closing is a formal meeting between all parties (i.e., Buyer(s), Seller(s), listing agent, and lender). It is recommended that you have an attorney represent you at closing to read and interpret the documents, and advise you on exactly what you are signing. Note that the closing agent is not allowed to give you legal council. You should bring proper identification (photo driver's license, passport, etc.). Once you sign the documents and pay the closing cost, you get the keys to the property (if applicable).
Actual Closing Costs
The Bottom Line on the settlement sheet begins with the sales price, plus total Buyer's closing costs, plus any pro-rations payable by Buyer, minus the Buyer's deposit, minus the principal amount of the mortgage, minus any adjustments payable by Seller, equals the amount the Buyer pays at settlement.
The HUD-1 Settlement Statement is a form required by law which itemizes the services provided. It lists charges to both Buyer and Seller. The settlement agent completes the HUD-1, which the Buyer and Seller both must sign.
The Lender's Closing Costs
The lender will charge various fees in connection with giving a loan. Some of the common charges will be explained below.
Title Charges include:
Additional Charges include:
Adjustments may include Items paid in advance by Seller that are reimbursed by Buyer or vice versa.
For more information about closing costs and the HUD-1, please read our Guide to Title Insurance Fees and Costs.