The Mortgage Process

What Is a Closing?

Know what to expect as you obtain your new mortgage loan.

This following information is designed to help you navigate the pitfalls that may occur between the time you submit your mortgage application and the final closing.  

The lender needs to know that the property has sufficient value to cover the loan amount.   Lenders typically like to lend no more than 80% of the value or purchase price of a home, although there are certainly programs available that may lend you up to 100% if you qualify. The lender will send an independent appraiser to tour the premises. You’ll do such smart shopping as an educated consumer that it’s unlikely that the appraisal will trip you up; you may have even had your own done along the way.

Home Inspection 

If you’re going to have a home inspection performed, get this done as soon as possible after your contract to buy is signed.  Now is the time to get rolling on this (budget $300 to $400 for it).  If the report comes back with negative comments, or items that need repair, decide with your lawyer how you’ll pursue this with the seller.  

Generally, the inspection helps protect you against major defects in the home.  Get as much repaired by the seller as you can, but if all that comes up wrong are minor items, think twice about pushing too hard.  Be reasonable!  The general rule of thumb is that repairs required in excess of $100 be taken care of by the seller.  Minor items of a lesser amount are let go, although health issues, such as asbestos, should always be corrected regardless of the cost.

Pest Inspection

The results of your pest inspection will be more cut and dried. You either have infestation or you don’t.  If you do, the lender may not go further with financing unless the matter is corrected.

Sample Closing Costs For Items Paid By Buyer

Closing costs around the country vary widely. Here’s a list of some of the costs typically paid by the buyer in conjunction with a home purchase.  Ask your lender or attorney for the amounts you should expect to pay.

• Title Search and Insurance          
• Attorney’s Fees     
• Bank Appraisal          
• Plot Plan or Survey
• Filing Fees     

Plot Plan

The lender will probably require that the property be surveyed by an engineer. This service is performed to determine and verify the boundaries and measurement of the property and certify its accuracy. Payment is the responsibility of the buyer.

Commitment Letter

Once the commitment letter is received by you, reviewed by your attorney and signed and returned to the lender, your attorney will have a pretty good idea of when your closing date will be set.  Once you are notified of when that will be, it’s important to get your funds together for the final transaction. Your lawyer will compute the actual figures, but pay attention at this point to how much cash you’ll need.

A few days before you close, you should perform what’s known as the ‘walk-through,’ your last chance to take a look at the property before it becomes yours.  Consider videotaping this experience since it will document your case should the seller decide to make any last minute ‘changes’ to the property you just purchased.  It will also serve to document any last minute repairs the seller must make before closing.

Who Pays For What?

In connection with the final transfer of ownership of the home from the seller to you, you’ll attend the closing and settle up on all charges. The document which summarizes the transaction is called the HUD 1 closing statement, which is required by RESPA (Real Estate Settlement & Procedures Act). Get a blank RESPA form from your attorney to give you an idea of what one looks like.  At the closing, your attorney will explain, in detail, the components of the RESPA statement as it applies to your individual situation.

Keep a list of what you think the costs are and use that list as a guide to compare to the RESPA form to avoid any surprises.

The Closing Itself

The check you bring to the closing meeting must be a certified or cashier’s check(from your Bank). 

At the closing, documents will be signed and exchanged, money will pass to the seller, and title to the property will pass to the buyer.  The sellers and their attorney, you and your attorney will meet at a pre-appointed time and place.  All documents will be ready and prepared by the attorneys.  You will have been notified a day or two before the meeting of how much money to bring with you.  By this time the RESPA form has already been prepared, so have your attorney send you a copy so you can review it before the closing.  

As you go along, your lawyer will explain what each document is that you are signing and why.  Ask questions.  This is an important and costly transaction... don’t be shy, it’s your money!

Loan Closing Checklist

At the closing meeting, your attorney will verify that all loan and title conditions have been complied with, explain all paperwork, ask you for your signature on all documents and provide you with copies. You may need to bring the following items with you:

• Photo I.D.   
• Certified check 
• Blank personal check (for any sundry charges) 
• Evidence of homeowner’s insurance and, if applicable, flood insurance 
• Evidence satisfying any remaining open loan conditions on your loan commitment letter