So, what exactly happens at a real estate closing?
The actual closing should take about an hour of your time. It could take a little longer depending on how chatty everyone is, or how many questions you have about what you are signing. Have a snack and don’t be shy about accepting water or coffee when it is offered. You’ll be a little nervous and a lot excited!
Bring your photo ID. The closing attorney will need a copy of that.
You will meet with your attorney (unless it’s a mail away closing) and he or she may have a paralegal to assist and witness. Your real estate agent is not obliged to attend the closing, but most good agents will be there for you to help you feel comfortable and answer any questions that come up.
If you are a first-time homebuyer, you might be surprised at how many documents you have to sign. When buying with cash, the process is much quicker, because there fewer documents. But when there’s a mortgage, there’s a ton of paperwork.
There are actually 2 parts to a closing:
Here are a few of the documents you’ll be signing as the buyer:
Documents related to closing your mortgage
Promissory note: Just as it sounds, when you sign this, you are promising to pay back the sum you’re borrowing. It also outlines the terms of the loan, including any prepayment penalties and interest rates. Check it over carefully before putting pen to paper.
Truth-in-lending statement: Prior to signing your mortgage contract, you will be given a federal “truth in lending” statement, also known as Regulation Z. This sheet of paper shows your interest rate, annual percentage rate, the amount being financed and the total cost of the loan over its lifetime. You should definitely give this document a close look to make sure there are no surprises.
Mortgage or deed of trust: This is another big step. When you sign this document, you are putting your new home up as security for the debt you now owe. Technically, the lender puts a lien on the property. If you don’t pay, the bank can take your home.
Monthly payment letter: This paperwork breaks down your monthly mortgage payment showing how much goes to principal, interest, taxes, insurance and anything else you are paying as part of the payment.
Documents related to your closing
Closing disclosure: This document replaces the old HUD-1 form. It itemizes the buyer’s and seller’s closing costs separately. As mentioned, by law, you are entitled to get this form three days before your closing meeting and should be in the same format as the Loan Estimate you got after applying for your mortgage. You should have had time to look this over before your meeting, but to err is human. Look it over carefully again. Review everything carefully before signing.
Warranty deed or title: This piece of paper transfers the title from the seller to the buyer. It also contains the legal description of the property.
Proration papers: These agreements explain how the buyer and seller are dividing up the property taxes, interest and perhaps homeowner association dues for the month in which the transaction is taking place. Buyer and seller might also sign an agreement stating how current utility bills are being split.
Statement of Information: This document may be called a statement of identity. The title company uses this personal information to eliminate any confusion between you and anyone with a similar name.
Declaration of Reports: An acknowledgment that the buyer has seen and signed off on all the inspection and survey reports done on the property.
Abstract of Title: The abstract lists all recorded documents affecting title to the property.
You will be offered title insurance at the closing. Title insurance protects both real estate owners and lenders against loss or damage occurring from liens, encumbrances, or defects in the title or actual ownership of a property. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences. Such claims include property ownership by another person, fraud or forgery of the title documents, unidentified easements, outstanding lawsuits, and liens against the property. Title insurance is purchased for a one-time flat fee. It’s one of those things that you will probably not need, but you sure will be glad you have it if something does come up affecting the title.
You hand will probably hurt after signing all the documents, but the feeling of excitement that comes with completing your closing is impossible to replace. If you have a good closing attorney, they will review and explain every document as you sign. Ask questions. Buying a house is a big deal. Be sure you walk out of your closing feeling confident that you completely understand everything you signed.
But wait…Don’t I get THE KEYS?
Once you have completed your closing and the seller has done the same, one important step remains: recording the deed. The transfer of property must be recorded at the courthouse in the county in which the property is located. It can sometimes take a full business day. Believe it or not, things can still go sideways between closing and recording. This action puts the purchase of your home and the transfer of property on the public record. When the deed is recorded, the home is officially yours and your agent will present your keys.
CONGRATULATIONS! Enjoy your new home!