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At the closing, ownership of the newly purchased home is officially transferred from the seller to you. It may involve you, the seller, the real estate agent, your attorney, the lender's attorney, representatives from the title or escrow firm, and a variety of clerks, secretaries, and other staff. It is possible to have an attorney act on your behalf if you cannot attend the meeting (for example, if the house is in another state). Closing can take as little time as an hour to sign all the forms and transfer ownership or it can take several hours, depending on the contingency clauses in the purchase offer (and any escrow accounts that may need to be set up).
Much of the paperwork involved in closing (or settlement) is done by attorneys and real estate professionals. You may be involved in some of the closing activities and not in others, depending on local customs and on the professionals with whom you are working.
Before you close on the house, you should have a final inspection, or walk-through, to make sure any repairs you requested have been made and that items which were to remain with the house (drapes, light fixtures) are still there.
In most states, settlement is done by a title or escrow firm to which you forward all the materials and information along with the appropriate cashiers' checks, and the firm will make the necessary disbursements. The real estate agent or another representative of the title company will deliver the check to the seller and the house keys to you.
Questions to ask before closing a loan
Once the lender has received information about the borrower and has discussed possible financing programs, what general loan questions should the borrower ask the lender before choosing the best loan?
The following are some questions a borrower might ask to clarify his or her loan choice:
- Is the loan assumable? Many originated today are not, so this might be a bonus, especially if the interest rate is low and you plan to sell in a short time. If it is assumable, under what circumstances, and you plan to sell in a short time. If it is assumable, under what circumstances, and would the interest rate change? How would that be determined?
- Can the buyer pay taxes and insurance outside of the loan payments? This is determined by the type of loan and lender requirements, but is great for the borrower’s cash flow!
- Is there a prepayment penalty on the loan? In a return to the marketplace, many lenders are using this as a way to recoup profits should a borrower want to refinance or need to sell. The tradeoff for the borrower is a lower-than-market interest rate. If you anticipate refinancing in the short term, you’ll want to avoid a loan with a prepayment penalty.
- Can prepayments be made on the principle? If so, is there any minimum payment? Some mortgages can only be prepaid in minimums of $100.00
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