Purchasing a home is an exciting time, but the process can be extremely complicated. Many first-time home buyers are lost when it comes to the ins and outs of the home buying process. The closing process is one of the most difficult parts of purchasing a home. First Fidelis has a few tips for navigating the closing process.
What is Closing?
First, let’s talk about what closing means. Closing is the final step in the home buying process. It is the time when both the buyer and seller sign the papers that transfer the ownership of the property from them to you or visa versa. As the buyer, this is also your final chance to make any final changes to the transaction. Generally, the closing process takes an average of 41 days, with the closing meeting being what wraps up the deal.
How Can You Prepare for Closing?
Before the closing date arrives, you will want to make sure that you have accomplished a few things. First, you will want to review the closing disclosure, which outlines the terms of your loan, the final closing costs, and any other outstanding charges or fees. You will receive this document at least three days before closing from your lender.
The borrower will have to sign the closing disclosure, and then there will be a waiting period before the mortgage loan documents can be signed.
Before the closing date, you will also want to do a final walk-through of the property to make sure that all previously agreed upon repairs were done. During the final walk-through, you will also want to verify that the seller has left the property and that it is left in the manner that you expected. Often, this walk-through is completed within 24 hours of closing.
If you encounter any problems during the final walk-through, you can delay the closing or ask that the seller provides the funds for necessary repairs in an escrow account.
All utilities should be transferred into your name on the day of closing to ensure that there is no gap in service.
What Happens at Closing?
A few things happen when you close on a home. First, you will need to sign a series of legal documents. These documents include the agreement between you and the mortgage lender and the agreement between you and the seller. It is important that you read all of these documents before you sign them. Don’t sign any forms that have blank lines or spaces that could be filled in later.
At this time, you will also pay all closing costs and escrow items. Since there are often a number of different fees associated with obtaining a mortgage and purchasing a property. In some cases, you might be able to include closing costs in your mortgage loan.
You will want to inquire about any paperwork or identification that you need to bring with you to the closing meeting. In some cases, you will need one or to different types of government-issued identification. Be sure that you know everything you need before you go into the meeting. You will also want to make sure you have proof of insurance and inspection reports.
What Are the Closing Documents?
Numerous documents are taken care of during the closing meeting. Here are the documents you should expect to receive during this meeting:
- Loan estimate: The loan estimate document contains information about the mortgage loan you are taking out, including terms, interest rate, and closing costs. All information on this document needs to be correct before you sign it.
- Closing disclosure: This document provides information on the details of your mortgage. You should get this document at least three days before closing, which gives you time to compare it to the loan estimate.
- Initial escrow statement: The initial escrow statement describes payments the lender will pay from your escrow account during the first year of the mortgage, which includes taxes and insurance.
- Mortgage note: The mortgage notes states that you promise to repay the mortgage loan. In this document, you will find the terms of the loan and what the lender can do should you fail to make your payments.
- Mortgage or deed of trust: This document secures the mortgage note and provides the lender with a claim against the home in the event that you don’t withhold the terms of the mortgage note.
- Certificate of occupancy: If you are purchasing a new home, you will need the certificate of occupancy to move in legally.
When all of these documents have been signed, the keys to the property will be yours!
Who Attends the Closing Meeting?
The closing meeting is a pretty big deal. A number of different parties are likely to be present at this meeting, including:
- Closing agent, who might work for the lending or title company.
- Attorney that represents either you or the lender. There may be two attorneys present, one for each the buyer and seller.
- Representative from the title company to provide written proof of the property’s ownership.
- Home seller
- Home seller’s real estate agent
- Home Buyer
The closing agent will run the meeting and make sure that all legal documents are signed and properly recorded. Additionally, the agent will make sure that any money exchanged ends up with the correct party.