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The Closing Process
Step by Step Guide  If it hasn’t already, the thrilling reality of buying a home will definitely hit you at the closing! Along with the excitement, the deed and the shiny new keys comes a stack of paperwork. To understand what you’re signing, it’s important to understand the events leading up to your closing. It starts when a seller accepts a contract you've put in on their home. You might put down a deposit check to prove you’re serious about the offer. At that point, your settlement agent (often an attorney, and also sometimes referred to as closing agent, escrow officer or escrow agent), gets the ball rolling, deposits any funds you’ve submitted into a special escrow account and puts in requests for title work, or an examination of the home's ownership history. A title company begins reviewing the title. Each home has a series of documents recorded at the local courthouse that reflect prior owners, lenders and other parties who have or had an interest in the home you’re buying. These documents are examined to identify all outstanding interests. Then, that paperwork is forwarded to your settlement agent. Mortgage issues are addressed. Your settlement agent works with your lender to verify dollar figures and other important details of the transaction. In addition, if prior mortgages have to be paid, or if a loan is being assumed, that’s worked out by your settlement agent as well. The property is inspected. In most cases, a professional inspector will conduct a home inspection, survey the property and inspect for termites to ensure the integrity of the property. The HUD-1 statement is prepared. Your settlement agent prepares this document which shows all costs that will be paid at your closing. Check with your settlement agent to confirm the amount you need to bring to the closing. You close on your property. You’ll need to provide a picture ID and funds in the amount that your settlement agent says you’ll need to complete the closing. During the closing, you (and whoever else is buying the property with you) will sign a number of documents, each of which will be explained to you by the settlement agent. After your closing process is complete, the house is yours. Welcome to homeownership! What is Title Insurance? How It Works Before you understand title insurance, you need to understand what a title is. Basically, a title is a term that includes all of your legal rights to own, use and sell a piece of land. The title reflects all previous ownerships and transfers, including rights previously granted by other parties, such as mortgages and easements. If there are problems with the title, the ownership of your land could be in question. Unpaid taxes, a lien (which is an unpaid claim) filed by someone who worked on the house, or any of countless other situations could cause a major problem. And even if you don’t get the land, you might still be responsible for the mortgage! That’s why it’s important to have title insurance. So what is title insurance? It’s insurance against undisclosed problems with the title, and it protects you against financial loss due to title defects, liens or other matters of public record. Title insurance will defend you against a lawsuit attacking your title, or reimburse you for the actual money lost. Before a policy is issued, a title insurance company conducts in-depth research to detect, prevent, and eliminate risks and losses caused by title problems. They do this by searching public records to develop and document the chain of title to the property and by identifying all outstanding claims. For a one-time premium, your owner's title insurance policy will remain in effect for as long as you own the property. Your mortgage lender will also require a title insurance policy. The lender’s policy protects the lender against any title problems that may affect repayment of the loan. The owner’s policy and the lender’s policy are two different policies, and the one-time premiums for both are usually paid by the home buyer. In a few states, the home seller pays for the owner’s policy. If you have a question about this, ask your real estate agent, mortgage lender, attorney or closing agent. |
