Understanding Closing

This is it. This is the day you’ve been waiting and working so hard for. The day that you get the keys to your new home. But what is closing?

Closing is the formal transferring of ownership from the seller to you. The date is established in the sales contract and is typically 30-60 days from the date the offer is accepted. Before you get the keys to your new home, you’ll have to attend closing (or settlement – these two words are used interchangeably in the industry).  Due to the language of the new TILA-RESPA Integrated Disclosure rule, you may also hear it called “consummation”.

Three Days Prior to Closing

Unlike prior to the implementation of the new TILA-RESPA Integrated Disclosure rule on October 3, consumers will now receive what is called a Closing Disclosure three business days prior to closing instead of a HUD-1 form. You should review the closing disclosure to make sure that it matches the Loan Estimate you were provided with after you applied for the mortgage loan. If the loan product has changed, the APR changed beyond allowable limits or a pre-payment penalty was added, then a new Closing Disclosure will need to be issued to the buyer and a new three day waiting period commences. Once the buyer has reviewed the closing disclosure and it is to their satisfaction, closing will continue as planned. At this time, you’ll know how much money you will need to transfer to the title company for closing. If you have made the sage decision to close with Purity Abstract Company, you have already received a letter with your closing instructions. If the amount being sent exceeds $10,000, it will need to be sent via a wire transfer. If the amount is under $10,000, Purity Abstract requires a certified funds or cashier’s check.

At this time in the transaction, you should call all applicable utility companies and notify them that you will be the new owner of the property and give them the start date of service. Make sure you provide the utilities with the date of settlement as the start date to ensure continuing service and to avoid any hook-up charges.

The Day of Closing

If at all possible, try to take the entire day off work to complete the closing process. Essentially, you have two closings this day: the closing of your loan and the closing of your real estate transaction. You’ll want to allow enough time to conduct a pre-settlement walk-through of the property and approximately two hours to complete the paper work.

The Walk-Through

Your REALTOR should schedule the pre-settlement walk-through as close to the time of settlement as possible. During this walk-through you’ll want to make sure that the seller has completely vacated the property and that the home is in the condition you have agreed to in the sales agreement. If the walk-through reveals any problems, you can delay the closing or ask for money from the sellers to address the issues.

What to Bring

Bring two forms of identification such as your driver’s license, passport, Social Security card, military ID, birth certificate, pay stub, a property tax bill or bank statement. You’ll also need your cashier’s check if the settlement amount is under $10,000. If you did not send proof of homeowner’s insurance to the lender or title company in advance, bring a copy of the policy with you.

Who is Present

  • The Buyer. The buyer will sign all legal documents to finalize the agreement between themselves and the lender regarding the terms and conditions of the mortgage and the agreement between themselves and the seller transferring ownership of the property.
  • The Buyer’s REALTOR®. The buyer’s REALTOR® will be able to answer any last minute questions the buyer may have about the real estate transaction.
  • The Buyer’s Lender. The buyer’s lender will be able to answer any last minute questions the buyer may have about the mortgage or mortgage documents that are being signed.
  • The Closer. The closer is the professional who is responsible for making sure all necessary paper work is completed.
  • The Seller. The seller may or may not attend settlement. The seller can complete their paper work in advance so if the buyer has any questions for the seller regarding the home, it is best if they are answered prior to settlement. Make sure you receive all security access codes prior to or at settlement.
  • The Seller’s REALTOR®. The seller’s REALTOR® will be able to answer any last minute questions the seller may have about the real estate transaction.

Documents You Will Sign at Closing

  • Closing Disclosure. You will receive another copy of the Closing Disclosure at closing. This is a 5-page document that provides the details of the mortgage loan, including the loan terms, estimated monthly payments and closing costs and was provided to you three days prior to closing.
  • Statement of Identity. You will be asked to sign a paper states you are who you say you are and that certifies your name and any aliases you have used in the past. This eliminates any confusion between you and anyone with a similar name.
  • The Note. This is the document that states you promise to repay the mortgage. It indicates the amount, term of the loan and what the lender can do if you fail to make payments.
  • Deed of Trust. This document secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note. Here’s where you’ll hear someone tell the bad joke, “If you pay, you stay. If you won’t, you don’t.”
  • The Deed. This piece of paper transfers title from the seller to the buyer. It also contains a legal description of the property. You will only receive a copy of the deed at closing – the original will be mailed to you in a few days from the title company once it has been recorded with the county courthouse.

Once closing is complete, you will leave with the keys and any other access devices such as the garage door opener to the property and the seller will leave with their proceeds. Congratulations to everyone!