Prior to the day of closing, you will receive HUD-1 Settlement Statement, which details the date and time of closing, which usually happens at a title company or an escrow office. The timeline is generally a month or two after your offer to purchase has been accepted by the seller.
As a precursor of closing, you need to ensure everything is alright, especially the charges you need to pay as settlement costs. Also known as closing costs, these are listed on HUD-1 Settlement Statement in actual dollar amounts. You already have the Good Faith Estimate presenting an estimate of these charges with allowable limits of change.
Your job is to scrutinize these two documents and compare the itemized charges. If discrepancies occur, you have a right to ask your loan officer and get the errors corrected. You may also like to do a final walk-through and ensure the property is in right condition and nothing has changed since you visited it the last time.
What Happens at Closing?
A closing is simply a meeting between all stakeholders of a property transaction. All parties that are involved in the transaction are required to sign relevant documents. The buyer also needs to pay for a number of costs and charges, usually referred to as closing costs.
At the end of the meeting, the documents are signed, the loan money is transferred to the seller and the property is handed over to the buyer, who is also the mortgagor.
Here is a brief summary of what happens at closing.
- The buyer signs a mortgage (or a deed of trust), creating a lien on the property being purchased.
- The lender will either wire or present a cashier’s check to the seller. The buyer also needs to make down payment at this time.
- The seller signs a document called the deed, which is a legal document transferring the ownership of the property to the buyer.
- The title company ensures that all necessary documents are properly signed and recorded, making the transfer of title ownership a smooth process.
- The buyer also needs to sign on the mortgage note, a legal document that lists all terms and conditions in relation to the mortgage loan you have obtained from the lender.
- Additionally, there will be a number of affidavits and declarations to sing for the buyer. At the end of the day, you will be a proud owner of home, receiving the key of your new home from the seller.
Happily Closed – What Next?
It will be a long journey since you have started out. You will need some time to recap and begin fulfilling your new responsibilities as a homeowner. Here are some tips to ensure prolonged homeownership.
- Move in your new home. You may want to do a few little things to make it your own, reflecting the taste and interest of you and your family members.
- Pay your mortgages on time. It is best to pay online, preferably with an auto debit arrangement. Your lender may offer to reduce your interest rate if you do so.
- Maintain at least three or four months of payments in your savings account. The reserve will come handy when you face a temporary hardship.
- Do not hesitate to give a call to your mortgage servicer when you begin to default or feel difficulty in making payments. The servicer may have a solution to keep you away from foreclosure.
- Keep your home in good condition. Maintain it by doing repair work when necessary. You have to spend on maintenance costs, utilities, and water and garbage services.
Maintain your credit. You might be able to refinance in future at low interest rate or seek a home equity loan to pay for several other expenses. As you move closer towards the end of your amortization schedule, you will begin to increase your equity more rapidly.
