You've just found the home of your dreams -- or at least it will be that way once you put your own flavor into it. The price is right, you're approved for the loan and now you're sitting in escrow for what seems like an eternity. Anything and everything can happen during this time, so strap yourself in and hold on tight. The events leading up to your closing date are filled with a lot of behind-the-scenes events that might either bore you to tears or leave you giddy with excitement as each step gets checked off the list. Every state might vary a bit in their practices, so you might want to get extra cozy with your real estate agent through these steps.
Before closing, the seller will arrange for a title search -- just to make sure there are no long-lost relatives or other interested parties with a claim on the home. As the buyer, you must arrange for a hazard and liability insurance policy for your new house. Absent this, the lender is not going to loan you a dime. A new survey might be drawn up to ensure that no building or fence is encroaching on your neighbor's property. A termite inspection is necessary to keep the creepy critters from destroying your wood, and you'll also want to exercise your right to hire a home inspector and check the place out thoroughly. Any problems the inspector finds should be completed before closing. After escrow closes, the seller is not obligated to make a single repair -- unless he's a nice guy and states he'll do so in writing.
Ready, Steady, Sign
If you've never signed mortgage papers before, better limber up your forearm. Seriously. Prepare to sign a ton of papers in the presence of a notary public or escrow agent, who then signs each paper to certify you signed the paper. These papers will be prefilled for you and approved by the lender. You'll sign a settlement statement, loan disclosure, mortgage note, deed of trust, deed, title policy and a slew of other documents. After you are left with a thick stack of copies for your own safekeeping, the originals are whisked away for the lender to review. Once the lender approves them -- typically one to three days -- it will release the funds to buy the house. When you're finished signing, you might never want to write your name again. Better yet, change your signature to a short squiggle for the next time you go through this.
Money, Money, Money
Closing day marks the happy day when all accounts are settled and title is passed to the new buyer. The seller receives the money for the house and retires the old loan. All fees are paid, including title insurance premiums, document filing fees, survey costs and attorney or inspector fees, if applicable. These are all listed under "closing costs" from the final HUD Settlement Statement you receive about two days before closing. Compare this settlement with the good faith estimate you received when you first obtained your loan. If they are vastly different, you should question them -- and haggle. You'll need a certified check for your portion of expenses on closing day.
Commission and Origination Fees
After the lender supplies the proceeds for the sale, it will collect origination fees and discount points, if applicable. From this day on, your new loan is accruing interest. The lender usually requires you to pay interest -- covered in your closing costs -- to cover the period from the day you close to the end of the month. The real estate agents also get their hard-earned commissions from the proceeds of the sale. At the close of escrow, all negotiations and transactions are over between the two parties. Your agent will hand you the keys to your beautiful, new-to-you home.
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