The Closing Process

You’ve found the home you want. You’ve made an offer which the seller has accepted. You’ve applied for a mortgage, and been approved. Move-in day is almost here. There’s only one more step - the closing.

The word “closing” in terms of real estate is the process by which the transfer of property from seller to buyer is finalized. Once your mortgage is approved, a date is set for the closing to take place: called a “closing date”.

Depending on the state in which the transaction is taking place, the closing process is conducted by one of the following representatives of buyer and seller, respectively:

* an attorney;

* a real estate broker;

* a lender/loan officer;

* a representative of a title insurance company;

* a representative of an escrow company.

In order for a closing to take place, several key items must first be prepared and delivered to the lender in advance:

* title search and title report;

* title insurance binder;

* hazard insurance binder;

* property survey;

* inspection certificates, for termites, sewer or septic, and well (where relevant);

* HUD 1 settlement statement - a list of all credits and charges itemized for you and the seller, according to the terms of the contract;

At the time of closing, the borrower signs many documents, most significantly a mortgage/deed of trust and a promissory note. These are loan documents granting the lender a lien against the property you’re purchasing as a way of securing your repayment of the loan. The promissory note is the borrower’s legal promise to pay back the loan. The mortgage/deed of trust is the legal instrument recorded in the local office of public records.

The closing is also when you must pay any remaining costs associated with the transaction, such as unpaid down payment and closing costs. If the money for these items is to come out of the loan, the agent handling closing (such as your lawyer) will write a check to the appropriate payees. Otherwise, it is your responsibility to have a cashier’s check or certified check in hand for each of the necessary amounts.

What you, the home buyer, are most looking forward to receiving at the time of closing (other than the actual house keys) is the deed. This is the document that the seller signs to legally and officially transfer ownership of the property over to you. In order to be valid, the deed must include an accurate and legal description of the involved property.

As eager as you may be to move into your new home, however, don’t rush through your closing process. This is your last and only chance to review all the agreements you’re making and get every last one of your questions on the transaction and its consequences answered. Be sure you know exactly what you’re agreeing to and exactly what you are and are not getting out of the deal.