Closing is the consummation of the real estate transaction, and your REALTOR® will be an invaluable asset in helping you prepare for it.
The closing process varies from state to state. In Indiana, closing is done face-to-face; that is, the buyer and seller sit down at the same table to complete the sale. A face-to-face closing involves the resolution of two issues; first, the promises made in the sales contract are fulfilled, and second, the buyer’s loan is finalized, and mortgage lender disburses the loan funds. It may be conducted at the title company or lender’s office – or at some other mutually agreeable location. The following people may attend:
- The buyer
- The seller
- The REALTOR® or broker for each party
- Attorneys for either party
- Representatives of the buyer’s lending institution, and
- A representative of the insurance company.
A representative of the lender or the title company typically presides. He/she will lead a review of an array of documents, such as the title insurance policy, surveys and other items.
When all parties are satisfied that everything is in order, the exchange is made. All pertinent documents must be recorded in the correct order to ensure continuity of title. For example, if the seller is paying off an existing loan and the buyer is obtaining a new one, the seller’s mortgage must be satisfied and recorded before the buyer’s since the buyer cannot pledge the property as security for the loan until he/she owns it.
As the buyer, you will be signing a lot of documents at your closing. These will include, but are not limited to:
- The HUD 1 or Uniform Settlement
Statement. This statement is required by federal law. It adds together your loan amount and closing costs and deducts your down payment to arrive at the amount of cash you will need to close. (As a buyer, you should be given a copy of the HUD statement prior to your closing.) Itemized costs may include:
- Loan origination fee
- VA funding fee, if applicable
- Appraisal fee
- Credit report fee
- Settlement agent’s fee
- Survey fee
- Fee to record the mortgage
- Fee to record the deed
- Document preparation fees
- Tax service fee
- Flood certification fee
- Courier fees
- Prepaid items (e.g., homeowner’s insurance premium, property taxes, interest on your loan from day of closing to the end of the month)
- A survey
- A note
- A mortgage
- A Federal Truth-in-Lending Disclosure Statement
- A name affidavit
- A statement that neither your credit nor your job situation has changed since you applied for your loan
- A form to be filed with the IRS allowing you to deduct your mortgage loan interest payments
- A check for your down payment and closing costs
- Endorsement of the check for the mortgage from your lender
You may or may not take possession of the home on the day that you close; those details will have been specified in your purchase agreement. Either way, be sure to take the time to celebrate your closing – welcome to the American dream!