Home Buying Process
Step 6: Closing Your Loan
The closing (or settlement) is the actual transfer of ownership from the seller to the buyer. At the closing, you will sign the paperwork, pay the final closing costs and finally take ownership of your new home. We'll work together to schedule a closing date, which is indicated on your purchase agreement. Although the closing process varies by state, many activities are standard. Click here to learn about what
closing costs to expect and things to consider before closing. For the closing costs, you'll need to obtain a certified or cashier's check, since personal checks usually aren't accepted by the title or escrow company.
What Happens at Closing
Closing costs and practices vary depending on your location, the type of property you're buying (house, condo or co-op) and individual circumstances. In some states, a neutral third party, usually an escrow company that is mutually chosen by the buyer and seller, transacts the entire closing process. In others, title companies customarily oversee the process. In the remainder, attorneys are engaged. We'll be in contact, so you know what to expect. The closing, typically held at a title and trust company, is the final hurdle to calling the house your home. You, the seller, real estate agents, the lawyers, the lender and any other interested parties will attend. The steps below explain what usually happens during and after closing:
- The closing agent reviews the settlement sheet with you. Both you and the seller sign the settlement sheet.
- Signatures are collected for loan documents, such as the mortgage or deed, note and Truth-in-Lending statement. Evidence of the required insurance and inspections is presented.
- If everyone agrees that the papers are in order, you submit a certified or cashier's check to cover your down payment and closing costs. (Or, in some proceedings, it is drawn from an escrow account established for your home purchase.)
- The lender provides check funds covering the home loan amount to the closing agent.
- If your monthly payments are to include property taxes and insurance, a new escrow account (or reserve) is established.
- You receive the keys to your new home!
Key Closing Documents You'll Receive
HUD-1 Settlement Sheet
This itemizes the services provided and the charges to the buyer and the seller. You should be allowed to review this form shortly before your closing meeting so you know your closing costs in advance.
Truth-in-Lending (TIL) Disclosure
You should be mailed your initial TIL disclosure within three business days of applying for a home loan. It outlines the costs of your loan and discloses the annual percentage rate (APR) and other terms of the loan, including the finance charge, the amount financed, the payment amount and the total payments required. Since it's possible that the APR calculated at the time of your loan application will change a little before closing, your lender is required to give you the final version of your TIL disclosure at or prior to the closing meeting.
Deed of Trust or Mortgage (also known as the Security Instrument)
These documents convey a lien in your property as security for repayment of your home loan. (This means that if you default on your loan, your lender has the right to foreclose your ownership interest and take possession of the property.)
The Note
The mortgage (or promissory) note represents your promise to pay the lender according to the agreed terms. It includes the dates on which your home loan payments must be made and the location to which payments must be sent. |
