When Do You Close on Your Mortgage?

by Kay Dean, Demand Media
    Closing is the event that transfers home ownership from the seller to the buyer.

    Closing is the event that transfers home ownership from the seller to the buyer.

    The average price of a new home in the United States was $270,900 in 2009, according to the U.S. Census, making buying a new home the largest purchase most people will ever make. The process of closing a mortgage can be exciting, a little scary, and even a bit confusing because of the technical jargon involved in the real estate industry, so if you don't know real estate, it is a good idea to work with good real estate agent who will act on your behalf.

    What Is Closing?

    The Federal Reserve Board refers to mortgage closing as the mortgage settlement process. It is the final step in the home purchase transaction and typically involves a number of interested parties, including the seller, the buyer, the title company, the lender, the real estate agents who represent the buyer and the seller, and others who may have an interest in the transaction. During the closing process all of the documents required to transfer ownership from the seller to the buyer will be signed, and all funds required to be paid will be transferred.

    The Home-Buying Process

    Closing is the final step in the home purchase process that may begin with getting pre-qualified or pre-approved for a home mortgage. Pre-qualification provides you with information regarding how much of a mortgage you can expect to be approved for. Pre-approval provides you with a commitment from a financial institution, such as a bank or mortgage company, for up to a specific amount. This can give you some bargaining power when negotiating your home purchase. Once you find the home you want, you make a offer and put up earnest money, generally around 1 percent of the offer price, to prove to the seller that you are serious. There may be a number of contingencies written into the contract, which must be satisfied before closing taking place. A contract will be written that will include all stipulations, including the division of closing costs between the buyer and the seller. Once all stipulations have been met, a closing date will be set, when all parties involved will sign the necessary documentation.

    Closing Costs

    Closing costs can vary widely and may include such items as loan origination fees, title insurance, appraisal fees, discount points, document preparation fees, taxes, credit report fees and home inspection fees. Your lender should provide you with a good-faith estimate of closing costs, but this is only an estimate, and final costs may differ, sometimes significantly. In some cases the type of mortgage loan may dictate who pays certain costs, but for the most part who pays which closing costs is subject to negotiation.

    Timing

    It takes time to gather the information and documentation required to close a mortgage loan, but most home mortgages can usually be closed within 60 days. If you have locked in an interest rate, it is important to make sure the closing date is before the lock expires. Lenders typically require an appraisal to be performed and homeowner's insurance to be obtained. A title search much usually be conducted to establish the right of the seller to dispose of the property. The title company selected to handle the closing must have time to gather and assemble all documentation, and all parties must be available to be present. Closing can take place once all the required paperwork is in place. Once the closing date is set, the buyer is usually given 24 hours before closing to do a final inspection of the property.

    About the Author

    After attending Hardin Simmons University, Kay Dean finished her formal education with the Institute of Children's Literature. Since 1995, Dean has written for such publications as "PB&J," Disney’s "Family Fun," "ParentLife," "Living With Teenagers" and Thomas Nelson’s NY Times bestselling "Resolve." An avid gardener for 25 years, her experience includes organic food gardening, ornamental plants, shrubs and trees, with a special love for roses.

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