The Closing Process

Purchasing a home is a great investment. The closing, or settlement as it’s called in some states, is one of the most important parts of the process. This is when you legally commit to your mortgage loan. Here’s a rundown of items to help you know what to expect and how to prepare.

Order Opened

A professional will search public records for debts, legal judgments and other homeownership issues to give you peace of mind in your investment. Some of the items reviewed include:

• prior deeds
• mortgages
• divorce decrees
• court judgments
• delinquent taxes
• child support payments

A title professional will also look for covenants, conditions and restrictions and other types of easements. When an issue is discovered, the title professional will take care of it—typically without you even knowing about it. If the problem is not easily resolved, you will be notified.

Did you know: Title searches reveal problems on more than a third of all residential real estate transactions.

Title Commitment and Insurance

Most lenders require you to pay a year of premiums up front for homeowner’s or property insurance. If your loan includes an escrow/impound account, the account will be set up for you to make monthly payments toward your future taxes and insurance on the property.

Don’t forget to make the smart choice and purchase an owner’s title insurance policy and protect your financial investment!

Closing and Official Signatures

During the closing, or settlement as it may be called in your area, you will sign many documents. Some key documents that you will sign include:

1. Closing Disclosure: This form contains the terms and costs of your transaction. By law, your lender must provide the Closing Disclosure to you three days before your closing.
2. Promissory Note: This document is your promise to repay the loan (mortgage) to your lender. The note provides details regarding your loan, including the amount you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment and the where the payments are to be sent. The note also explains the consequences of failing to make your monthly mortgage payments.
3. Deed of Trust: This document, which may also be called a Security Instrument or Mortgage, transfers legal ownership of the property with the condition that the lender may foreclose on your home if you fail to repay your mortgage. This document restates the basic information included in the Promissory Note, as well as explains your responsibilities and rights as a borrower.

Transaction Complete

This is the best part! A completed closing means we have received all closing documents and funds for your address, and the real estate transaction is officially closed.

To learn more about the closing process, check out Home Closing 101.