Closing a Loan

Once your application has been approved and you possess a commitment letter from the lender, there is one last step. The final step before you own the home is the settlement, or closing of the purchase transaction. Once the legal title of the property is transferred to you and the home loan is closed, you will have full rights to the property. You should have a good idea of what the closing process entails to help the process go as smoothly as possible.

At closing, the seller will execute the deed to the property, you will sign the loan documents, and funds will be collected and distributed. The closing agent will make sure that you have legal ownership of the property, and all closing fees will be paid out. Settling a mortgage loan is a legally binding process where procedures and stipulations may vary depending on local laws. The following inlcude tips along with a general description of what you can expect before, during, and after closing on a mortgage.

Before Closing on a House

Know who will be there. Of course you will be there, alongside a closing officer that will represent your lender or the title insurance company. The closing officers are there to make sure all the required documents are signed, and that the money from the sale is properly dispersed. You may also have an attorney or advisor present with you at closing. Sometimes real estate agents and sellers will be present at closing as well as a notary. Often buyers and sellers never see each other during the transaction, completing their paperwork in separate rooms.

Before closing, you can review all of your documents with an attorney or legal aid to make sure there are no errors or complications. These documents should include:

The Mortgage. This is a document you sign that pledges the home as collateral. In some states, buyers will sign a “Deed of Trust ” instead, which essentially performs the same function as a mortgage document.
The Mortgage Note. This document is your promise to pay back the loan. It has the terms and conditions of the loan and stipulates how you will repay it. All the details such as your monthly payment for interest, when it’s due, and the length of the loan will be in this document.
The Settlement Statement. This document was created by the federal government’s HUD (Department of Housing and Urban Development) and is used to itemize all the costs related to the loan.

What to Bring When Closing on a House

You’ll need to bring a few things along with the required documents to closing. As the home buyer, you should bring the following:

A binder for Homeowners Insurance and Paid Receipt. You will need to have your binder for homeowners insurance and your paid receipt for the first year’s premium. You will not be able to obtain a mortgage without your receipt.
Cashier’s Check or Certified check to cover the down payment and closing costs. Your lender will let you know the exact amount that you need to bring a couple of days before closing.

Home Loan Closing Procedure

Closing will start once the closing officer verifies that you have your paid receipt and binder for homeowners insurance. You will sign each document and be given an opportunity to ask any questions. Usually the closing officer will review the mortgage note and the mortgage document first, then move on to the settlement statement.

In these documents you’ll find a complete breakdown of all the costs associated with the loan. After the closing officer has gone through the settlement statement, you can now pay the down payment, and closing costs. When all of the borrower’s documents have been explained and signed, the closing officer will then move on to the seller’s documents.

After Closing on a House

The Deed is the legal document that transfers ownership of the property from seller to buyer. The closing officer is responsible for logging the Deed for the property with the Registrar of Deeds in the county the property is in after closing. After you have worn out your favorite pen signing all the documents, and you have paid your down payment and closing costs, closing is finished. The date of possession will be stated in the purchase contract, so if it’s that day, then you will receive the keys to the property that same day. If not, you will make arrangements to receive the keys on the possession date.