Buyer Closing Instructions
After the searching for a home, the negotiations, the home inspection, and the mortgage application are all completed, the focus suddenly turns to the Closing, Settlement, or Escrow as it is known in some localities. An understanding of the elements of and players in the closing will eliminate many nervous hours as the day approaches.
What is involved?
Closing is the process of which will put the title to the house in your name, verify homeowners’ insurance on the property, commit in writing to the terms of the mortgage, and usually, put the keys to the house in your hands. In general, you will leave the closing and go to your new home as a homeowner.
Closing procedures will vary from locality to locality. In some areas, the buyers and sellers (as well as their Real Estate Agents) will all attend the closing. In other areas, only the buyers will be present. The closing will take place at the office of an Attorney, a Title Company, or an Escrow Company (again, there is some variance here based on your local laws and tradition). In general, though, the closing will be attended by all of the buyers involved and their Real Estate Agent, as well as the Closing Agent, who has reviewed all of the components of the house sale and who is the one who will say “sign here” more times than you have ever heard in your life.
How much will my closing costs be?
The amount of closing costs will depend on what items are customary for buyers and sellers to pay for in your area. Traditions vary greatly from one area of the country to another. In some areas, for example, the buyer pays for title insurance. In other areas, it is the responsibility of the seller. In still other areas, the cost is split between buyer and seller. Your Agent can give you specific information on the items that are customarily paid for by buyers in your area. In addition, the amount of closing costs will depend on the amount of points you will be paying with your mortgage loan, since these are generally paid for up-front. (A point is 1% of your mortgage loan amount).
What forms are involved?
The primary documents that are dealt with at the Closing are:
- The Settlement Statement
- The Contract
- The Loan Papers
- Title Insurance
- Homeowners’ Insurance
- The Title or Deed
- The Down Payment and Closing Costs
It is important, therefore, that you do adequate preparation prior to the day of Closing.
What items will we need?
The following are the most important items that you will need prior to or at closing and some hints regarding them:
A Closing Cost Estimate: This should first be given to you by your Agent at the time of the contract, and then given to you by the Lender, a Good Faith Estimate, shortly after the application for the loan. This should give you a reasonably close estimate of funds you will need at the time of closing.
The Settlement Statement: You should have a copy of the Settlement Statement before the date of Closing. Generally this will not be available until one or two days prior to the actual Closing, but it is important to have it because it gives you the total amount of cash you will need at Closing and also how those various funds will be dispersed. In addition, it gives you an opportunity to iron out any discrepancies prior to sitting down at the Closing table. Your Agent should also have a copy for review.
Certified Funds: On the day of Closing you will need certified funds for closing costs and down payments. This is an important reason for needing a copy of the Settlement Statement a day or two in advance–so you know the amount of funds needed and so that any problems can be handled in advance.
Homeowners’ Insurance Policy: This must be secured prior to the date of closing.
By making adequate preparations in advance, you will be far less likely to run into surprises when everyone is ready for closing.