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of the Month
Closing Your New Mortgage
If the application is found acceptable, the firm commitment
is issued to the borrower and the lender prepares for
the closing of the mortgage - the final step before you
can call the house your own. In fact, two separate closings
occur at this time: the closing of your loan and the closing
of the sale. At this stage you should take care of the
following things:
Closing date. Once your application for a mortgage loan
has been approved and you have
received a commitment letter from the lender, you should
settle with the seller and lender theactual date of closing.
Make sure that settlement will take place before your
rate lock
agreement expires.
Closing costs.You’ll be required to pay your closing
costs and down payment at the
settlement. It’s important to know before closing
date how much money you’ll need at closing.
Within three business days of receiving the loan application
RESPA requires the lender to give you a Good Faith
Estimate of closing costs, which lists the charges the
buyer is likely to pay at settlement. This is only an
estimate and the actual charges may differ. Go to our
page Closing Costs to see a list of the costs and fees
you can expect to pay at closing.
The HUD-1 Settlement Statement is a standard form
that shows you the actual amount of money you’ll
need to bring to closing. RESPA allows the borrower to
request to see the HUD-1Settlement Statement one day before
the actual settlement. Sample of the HUD-1 Settlement
Statement.
Let the lender know that you will want to see the HUD-1
Settlement Statement before closing and question any amount
that you do not understand. It is also advisable to review
all the documents you will need to sign prior to the closing
date.
Final inspection of the property. If repairs or maintenance
on the property are a part of the purchase agreement you
should make a final inspection of the property.
Depending on local custom, closing could be conducted
by an escrow agent, attorney
representing you or the lender, real estate agent, or
title insurance company's representative. Here is a list
of the major documents you will have to sign at settlement:
The Deed is the document that transfers title
to real property from one owner to another. The deed should
contain an accurate description of the property being
conveyed, should be signed according to the State laws
where the property is located. The deed will be sent to
you after the closing agent officially records the deed
at your local government office.
The Mortgage is a lien on the real property that
gives the lender the right to take the property by foreclosure
if you default on the loan. It states your and lender
legal rights and obligations including your responsibility
to make your mortgage payments (principal and interest)
and pay real estate taxes and insurance on time.
A Deed of Trust is used in place of a mortgage
in some states. By signing a deed of trust, the borrower
transfers the legal title for the property to the trustee
until the loan balance is paid. If the borrower defaults
in the payment of the debt, the trustee may sell the property
without legal proceedings.
The Note is legal document that acknowledges
a debt and promises to pay according to the agreed terms
of the loan. It also recites the penalties and steps the
lender can take if you fail to make your monthly mortgage
payments.
The HUD-1 Settlement Statement must be signed
by both you and the seller.
The Truth-in-Lending statement is required by
the Truth-in-Lending act. It discloses the
terms of the loan, including the interest rate, the loan
amount, the annual percentage rate (APR) and the total
payments required. If no changes in the loan terms have
taken place since the loan application than this form
isn't required.
The Initial Escrow Statement itemizes the estimated
taxes, insurance premiums and other charges anticipated
to be paid from the escrow account during the first twelve
months of the loan. It lists the escrow payment amount
and any required cushion. An Annual Escrow Statement must
be also delivered to borrower once a year.
The Mortgage Servicing Disclosure Statement discloses
to the borrower whether the lender intends to service
the loan or transfer it to another lender.
Make sure you know exactly when and where you should send
your first and subsequent
payments and what the penalties are for being late.
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