Mortgage Advice
Mortgages

Understanding Mortgages: What is Closing?

(07/19/2012) In the midst of one of the most uncertain real estate markets in history, it’s more important than ever to be informed. In a continuing series, we take a look at some of the most pressing questions about mortgages, refinancing, home equity, and other real estate options available to you.

When a home is purchased, the final step in the process is closing. Depending on how much you know and understand about the process, closing can either be a smooth transaction with a happy ending, or a painful surprise.

The primary purpose of the closing meeting is to sign the ownership papers for the property. The buyer will sign a number of legal documents, including agreements on the mortgage, and agreements on the transfer of ownership from the seller to the buyer. This signing process should involve some close reading, and will require some time.

The other purpose of the official closing meeting is to pay the down payment and closing costs. It’s at this meeting that the buyer will provide the full down payment amount, and will be responsible for a number of fees . Typical closing fees can include: a loan origination fee, an appraisal fee, the cost of a credit report, a lender’s inspection fee, the cost of title insurance, a mortgage broker fee, taxes and a fee for document preparation.

It’s these fees that can occasionally surprise unprepared buyers, as they can add up quickly. It is not unusual for closing costs to total several thousands of dollars. Closing officials are required to provide a clear estimate of typical closing costs at least one day prior to the event. However, buyers can work with their real estate agent and broker to get an idea of the total amount well before closing approaches.

The closing meeting will typically occur at a title company’s office, and can include a number of participants. Representatives of the buyer and seller will be present, as well an attorney, title company official, mortgage broker or other lender, and the buyer and seller themselves.

A successful closing meeting will end with the buyer receiving a few important documents. These will include the HUD-1 settlement statement, which is a detailed list of all costs around the sale of the home. Several documents will be included specifying the loan details, including a TILA statement, mortgage note, and mortgage or deed of trust. This deed can serve as proof of ownership, or a separate document may also be included.

The final thing a buyer will receive after a successful closing meeting? Their home keys. Ownership officially transfers after this meeting, and buyers are free to take control and move in.