Settlement Day aka Closing, very helpful for first time home buyers.
What happens at a closing?
This is especially useful for first time homebuyers that have never gone through a closing and feel apprehensive, because they do not know what happens?
The closing is a process to finalize the sale and the loan. The seller, buyer and lender execute the final documents at an escrow agents/ attorneys office
Ø Once you have the loan commitment letter, you can set a settlement date for the closing.
Ø It is important that the settlement take place before your “rate lock period” expires. It is a comittment by the lender to hold a promised interest rate and points for you for a specified period of time. This is especially important for a new home purchaser, if there arise delays in the building of the home. Longer loan locks are available, but can be costly, unless one uses the builders lender. There could be some negotiating room.
Ø It is also important to have any final inspections done before this set settlement date, especially if any repairs or maintenance are part of the purchase agreement.
Ø Also by now you should know the down payment and any closing costs applicable to the buyer side of the transaction.
Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to give the buyer a Good Faith Estimate of closing costs within three business days of receiving the loan application. This estimate lists the costs that the buyer is likely to pay at the settlement.
For the actual closing costs, you have the right to request to see The HUD-1 Settlement Statement (the prescribed form from the U.S. Department of Housing and Urban Development) one day before the actual settlement. The escrow agent fills out the Hud-1 statement. Prior to the closing, you should review all items on the settlement statement and all documents that you will need to sign in order to clarify any misunderstandings. Of course having engaged a Realtor you now know all the facts, no surprises.
All participating parties will sign the necessary documents at the closing. It is important to understand qwhat you are signing and what some of the document are as listed below.
The Hud-1 Settlement Statement. This statement is signed by both parties the buyer and the seller.
Ø The deed is the legal document that transfers title to real property. The deed should contain an accurate description of the property, be signed and witnessed according to the laws of the state where the property is located, and should be delivered to the purchaser (after the agent officially records).
Ø The mortgage is a lien on the property that gives the lender the right to foreclose on the property if you default on the loan.
Ø A deed of trust is a document used in some states instead of a mortgage, that transfers legal title of the property to the trustee until the loan is paid off, giving the trustee the power to sell the property to satisfy the debt in the case of default on the loan
Ø The note is the legal debt document and a promise to pay according to the terms of the loan.
Ø The truth-in-lending statement is required if any changes have been made to the loan terms since the loan application. It must disclose the terms of the loan, the interest rate, the loan amount, the annual percentage rate and the total payments required.
Ø The initial escrow statement lists the estimated costs to be paid from the escrow for the following year, the escrow payment amount and any required reserves.
Ø The mortgage servicing disclosure statement tells the borrower where and to whom payments are to be made to. It is important to know when your first payment is due and where it should be made. After the escrow agent properly records all the documents, you may take possession of your property according to the settlement agreement. Whew, that was easy, good thing you engaged a Realtor.