Mortgage Expert Blog

2016 Mortgage Closing Process

April 18th, 2016 | first-time home buyer, mortgage, closing

Closing on time is a commitment

Closing on your new mortgage is the last step in home buying process. Once you’ve completed your closing then you are a homeowner. This is the most important step because without closing, you don’t actually own your home. We’re going to take you through all the details of the mortgage closing process.

Expectations:

If you’re purchasing property you will:

•Complete your pre-closing walk-through
•Bring your funds to closing
•Show up to closing and sign away!

If you’re refinancing you might need to:
•Maybe need to bring some cash to closing to cover escrows, closing costs or principal reduction
•Receive cash

You will be signing a lot of paperwork so before you do so you must understand what you’re committing to when you sign those final documents.

Prepare Before Closing

Closing Costs

It’s important that you understand closing costs. Closing costs are divided into three categories which are:

Charges that cannot increase at settlement:

•Origination fees
•Discount points, or premium points, for the chosen interest rate
•Adjusted origination charges

Charges that cannot increase in the aggregate by more than ten percent at settlement:

This means the total of all these charges can’t increase by more than ten percent over the total disclosed in the GFE.
•Required settlement costs for services that the lender chooses, such as the property appraisal
•Title and escrow services and the lender’s title insurance (if chosen by lender or if the borrower uses a company identified on the Settlement Services Provider List)
•Required settlement services (such as pest inspections) that the borrower selects from the Settlement Services Provider List
•Government recording charges

Charges that can increase at settlement without limit:
•Required settlement costs for services that the borrower chooses, if the borrower selects a service provider not included on the Settlement Services Provider list
•Title services and lender’s title insurance, if the borrower selects a service provider not listed on the Settlement Services Provider List
•Owner’s title insurance, if the borrower selects a service provider not listed on the Settlement Services Provider List
•Initial deposit for escrow account
•Daily interest charges
•Homeowner’s insurance

One reason that the Good Faith Estimate (GFE) is so powerful is that a lender must disclose its charges accurately. Fees are not subject to the tolerances listed above should a material change occur that directly impacts the fee, and a revised GFE is provided within three business days after the change occurs.

Paperwork

There will be many closing documents to review and sign. These may include:

•Settlement Statement
•Truth in Lending Statement TILA Statement
•Mortgage note
•Mortgage
•Certificate of Occupancy

Tips for a Smooth Closing

Your mortgage closing should be a mere formality with no surprises. Hopefully this is the case but not all closings go as anticipated. You can increase your chances of an uneventful conclusion by following these tips:

1.Read the final documents at least 3 days before closing – Ask your mortgage lender to deliver copies of your final documents to you 3-7 days prior to your closing date. It’s much easier to review them without time pressures and real estate agents and sellers breathing down your neck.
2.Understand and agree to everything you sign and if you don’t understand something you’re signing don’t sign it until you do. You are responsible for everything you sign so don’t obligate yourself to anything you don’t understand or agree with. With most refinances, you do get a three day right of rescission, but with a home purchase there are no do-overs.
3.Review the settlement statement – The most important document you’ll sign is the HUD-1 settlement statement. It lists all charges and indicates who pays what to whom. There’s a section that compares the closing costs from the last Good Faith Estimate (GFE) from your lender to the actual costs. This is important — by law, some of the charges can’t vary from the GFE at all, while others can vary within certain tolerances. If a lender makes a mistake and there are overcharges, it has to eat the difference – not you.
4.Meet any closing conditions when you come in – these could include bringing a cashier’s check for your down payment and / or closing costs, and satisfying underwriting conditions like paying off collections. You’ll need proper identification and perhaps other paperwork like a power of attorney.

No Surprises

Closing a mortgage should come with no surprises. By working with an experienced Loan Officer and being pro-active in the process you will ensure a smooth and successful closing. My team is always here to help and to ensure a perfect closing.

Mark Merry your Edina Mortgage expert