The final days before closing on a home are a busy and emotional time for both the homebuyer and seller. Closing on a property means that the sale is complete, all the terms and conditions of the purchase agreement have been met, and the sellers give the buyers marketable title to the property. Closing costs are the total costs of completing the transfer of ownership. These costs are extra fees and expenses aside from the purchase price. On average, closing costs range from three percent to five percent of the total loan amount. For example, for a loan of $300,000, closing costs might run in the $12,000 range.
The day before closing, be sure to gather all of the paperwork you have received throughout the buying process, such as a good faith estimate, contract for sale and purchase, proof of title search and insurance if necessary, flood certification, proof of homeowners and private mortgage insurance, home appraisal and inspection reports, and so on. You may need to refer to these documents at closing. Basically all sales contracts entitle you to a walk-through inspection of the property 24 hours before closing. This is to ensure that the seller has vacated the property and left it in the condition specified in the sales contract.
If there are any major problems, you can ask to delay the closing or request that the seller deposit money into an escrow account to cover the necessary repairs.
Your purpose at the closing table is two-fold, to sign legal documents, and to pay closing costs and escrow items. There are usually two agreements, one being between you and your lender (if applicable), and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully before signing them, and do not sign forms with blank lines or spaces.
Just before the closing, or while at the closing itself, you will receive an HUD-1 settlement statement, which is a detailed list of all costs related to the sale of the property. Both you and the seller (who may be paying some of the closing costs) sign it. Borrowers should compare their HUD-1 statements against their good faith estimate to see if the actual closing costs differ significantly from the closing costs estimated by their lenders earlier. By law, you have the right to review this document 24 hours before closing; it’s always a good idea to do so just to make sure you have additional time to clear up any mistakes and/or resolve potential problems.
If you are financing the property, you will also receive the final Truth-In-Lending (TILA) statement, a mortgage note, as well as a mortgage/deed of trust. You should receive the first TILA statement version after applying for your mortgage. The final version outlines the cost of your loan and APR, and takes into account any modifications made to your rate, points, etc., between the initial application and the closing. Make sure that everything is in order. The mortgage note simply states that you promise to pay the mortgage, outlining the amount and terms of the loan, and what the lender’s options are in case you fail to make payments. The mortgage or deed of trust secures the note and gives the lender a claim against the property if you fail to live up to the terms of the mortgage note.
Once you’ve reviewed and signed all closing documents, the keys are yours and you will have successfully purchased your new property! If it happens to be new construction, there is an additional document called the Certificate of Occupancy that you will also need in order to lawfully occupy the property. And that essentially concludes this guide! For a few post-purchase tips, feel free to move on to the next and final section. If you have any further questions, don’t hesitate to select the tab above and ask! You can also click on “search sales” to browse through all currently available listings, or select “our services” to get in touch with one of our real estate associates, who can provide valuable guidance and have a lot more tips and information on the entire buying process.
