What is involved in a closing?

Not too long ago, I was sitting at the Closing Table with my buyers and they were signing all the necessary documents at the Title Compnay.  Excitement and anticipation were running high as this was the final step in closing on their new home.

They were moving from a city about three hours away and all of their belongings were packed away in a U-Haul truck which was parked in a nearby hotel parking lot.

Within the next 24-48 hours, my clients would be settling in to their perfect dream home.

SCREEEECH!!!

Hold the phone!  Have you ever seen an inflatable bounce house rapidly deflate?  That is what happened at the closing table.

My clients were small business owners and were self employed.  Qualifying and cash to close was never an issue.  However, those pesky business taxes can be so confusing.  You see, personal tax day is April 15th, as we all know, but business tax day is October 15th and it was looming.

Working with a strong, knowlegable mortgage broker, we had cleared all of the hurdles with just days to spare.  IRS tax transcripts can be difficult to obtain and the lender had required the past two years transcripts.

Then, without any warning, while signing the documents, we learned the lender now wanted three years worth of transcripts.  This deal had already been delayed and had been revived from life support previously and this was the straw that broke the camel's back.

With no way to obtain the transcripts from three years ago in a matter of hours, the deal fell apart. My clients lived in a hotel for the next 6 weeks until they were able to close on a different home.

That closing went smooth and there were no issues.  Why, because we had everything in place (this time) to ensure a successful clsoing.

So, you may ask, "What is involved in a closing?"

Among various other tasks, the title company will coordinate with the mortgage lender to receive the loan documents for closing.  Once the Escrow Officer receives those documents, he/she review all forms and ensure compliance with the lender requirements for closing. 

With these documents, the Escrow Officer is then able to complete the Closing Documents.These documents, formerly known as the HUD-1, are some of the most important documents to sign because they detail all of the costs associated with the purchase and sale of the property. 

When you get a mortgage, you will need to pay closing costs, which are fees – charged by lenders and third parties -- related to the purchase of the home. So, in addition to owing the lender the down payment on the home and the principal and interest related to the mortgage, you will also owe the lender and third parties closing costs, which you usually pay at the time that you close on your mortgage.

Most of the time, it is the home buyer and the home seller who pay the closing costs.  Some costs are always attached to the buyer, other costs are always attached to the seller and everything else can be negotiable.

What charges go into your total closing costs?

Closing costs vary widely based on where you live and the property you buy. Closing costs often include things such as:

• A fee for running your credit report.

• A loan origination fee, which lenders charge for processing the loan paperwork for you.

• Attorney’s fees.

• Charges for any inspection required or requested by the lender or you.

• Discount points, which are fees you pay in exchange for a lower interest rate.

• Appraisal fee.

• Survey fee, which covers the cost of verifying property lines.

• Title insurance, which protects the lender in case the title isn’t clean.

• Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.

• Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.

• Recording fee, which is paid to a city or county in exchange for recording the new land records.

• Underwriting fee, which covers the cost of evaluating a mortgage loan application

 How much will you pay in closing costs?

Typically, home buyers will pay between about 2 and 5 percent of the purchase price of their home in closing costs. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, buyers pay roughly $3,700 in closing costs, according to a recent survey.

At closing, all documents are explained to all parties prior to signing.  Settlement lasts approximately one hour.  After closing, the Title Company will disburse all the monies collected at settlement pay off and release the existing mortgages on the property and prepare the loan documents to be returned to the lender.

It is the responsibility of the Title Company to make sure all documents are properly recorded in the courthouse, such as the new deed and mortgage.  They will also ascertain the release of any existing liens on the property.

Once the paperwork has recorded, ownership of the property transfers to the buyers and they will recieve thge keys to their new home.

What can I do to assist with a successful closing?

You will need a strong Realtor and a strong mortgage broker advocating for you.  That said, your responsibilty is to follow their instructions and respond to their requests in a timely manner. Time is of the essence and any delay on your part in prooviding requested documents/information could literally be the difference in getting into your new home or not.

Remember my clients at the beginning of this post?  There may have been some teeth pulling in getting all of their documents together and we sw how well that worked out for them!

Also, DO NOT MAKE ANY SIGNIFICANT pruchases during the escrow period.  Especially on credit.  A credit check was conducted when you were aprroved for your mortgage and it will be done again at closing to ensure nothing has changed.

Resist the temptation to go and buy new furntiure or decorations for the new place until AFTER all the ink has dried and you are in your new home.

Avoid applying for new credit, even if you get 20% off on today's purchase at Kohl's.  It could kill your ability to close the loan.

The escrow process does not need to be difficult.  By staying in close touch with your Realtor and your loan officer, and by responding to their requests in a timely manner, you should have no problems or surprises when you are finally seated at the closing table. 

Can something come out of nowhere and attempt to derail the deal? Of course! But, thats what keeps it interesting!

In most cases however, it all ends with "Congratulations!  Welcome to your new home!"

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