Closing the SaleClosing the sale is the final step in the home-buying process. It occurs after all activities related to the sale have been completed (property appraisal, location service, title search, loan approval, etc.), and all documents have been prepared for final signature (mortgage loan, promissory note, deed, etc). At closing, title transfers from seller to buyer, the buyer's financial arrangements are completed, and all funds are disbursed.
It's important to read and understand each document you sign at closing. You may feel overwhelmed. However, these documents do no more than confirm what you have already agreed to in the sales contract and loan application process.
Some of the documents you sign at closing include:
Truth-in-Lending Disclosure StatementThis document includes the amount financed, total payments and finance charges, the type of loan (conventional, ARM, FHA), the amount of the monthly principal and interest payment, the number of payments, the first payment due date, and the penalties for prepayment and late payment and when they may be charged. The truth-in-lending statement also includes the annual percentage rate. This percentage reflects the true cost of your loan, taking into account the interest rate, points and 30-days interest. This document is perhaps most significant as an indicator of what you will be paying should you hold your mortgage loan until maturity. An initial disclosure will be sent to you shortly after you apply for your loan. A final disclosure is presented at closing.
The Promissory NoteThis document is a formal, written acknowledgement of your debt. Like the mortgage, the promissory note states the amount of your loan, the rate of interest to be paid, manner of repayment, and the conditions which constitute default. By signing the promissory note, you assume personal liability for your loan and promise to abide by its terms.
The MortgageThrough this legal instrument, you pledge your property as security for the loan. The mortgage will contain the amount of the loan, terms and condition of repayment, and the conditions for default and foreclosure.
The Settlement StatementThe buyer and seller receive separate settlement statements that account for all monies involved in the transaction. As the buyer, you will receive a document that itemizes all information pertinent to the purchase: the expenses you agreed to pay in the sales contract (appraisal, location service, real estate taxes, title search, title insurance, etc.), the charges associated with your mortgage loan (loan origination fee, credit report, mortgage insurance, homeowners insurance), and charges by the local government for transfer tax and to record the deed. Your settlement statement also shows your earnest money deposit, down payment, and the amount of the mortgage loan.
The DeedCheck the deed carefully. It is the instrument through which the seller's property becomes yours. Make sure the property is properly identified in the legal description, a detailed narrative that distinguishes your property from all others by establishing exact boundaries. Check to see that all names are spelled correctly and that the deed transfers title in the way you specified in the sales contract. Once the deed is signed by the seller and delivered to you, the legal transfer of title is completed.
Congratulations! You're a homeowner!
Closing the Sale
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