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Closing Terms If the application is found acceptable, the firm commitment is issued to the
borrower and the lender prepares for the closing of the mortgage - the final
step before you can call the house your own. In fact, two separate closings
occur at this time: the closing of your loan and the closing of the sale. At
this stage you should take care of the following things:
Closing Date:
Once your application for a mortgage loan has been approved and you have
received a commitment letter from the lender, you should settle with the seller
and lender the actual date of closing. Make sure that settlement will take place
before your rate lock agreement expires.
Closing
Costs: You’ll be required to pay your closing costs and down
payment at the settlement. It’s important to know before closing date how much
money you’ll need at closing.
Within three business days of receiving the loan application RESPA
requires the lender to give you a Good
Faith Estimate of closing costs, which lists the charges the buyer is
likely to pay at settlement. This is only an estimate and the actual charges may
differ. Go to our page Closing Costs to see a list of the costs and fees you can
expect to pay at closing.
The HUD-1
Settlement Statement is a standard form that shows you the actual
amount of money you’ll need to bring to closing. RESPA allows the borrower to
request to see the HUD-1 Settlement Statement one day before the actual
settlement.
Let the lender know that you will want to see the HUD-1 Settlement Statement
before closing and question any amount that you do not understand. It is also
advisable to review all the documents you will need to sign prior to the closing
date.
Final
Inspection of the Property: If repairs or maintenance on the property
are a part of the purchase agreement you should make a final inspection of the
property.
Depending on local custom, closing could be conducted by an escrow agent,
attorney representing you or the lender, real estate agent, or title insurance
company's representative. Here is a list of the major documents you will have to
sign at settlement:
The Deed
is the document that transfers title to real property from one owner to another.
The deed should contain an accurate description of the property being conveyed,
should be signed according to the State laws where the property is located. The
deed will be sent to you after the closing agent officially records the deed at
your local government office.
The Mortgage is a lien on the real property that gives the lender the right to take the property by foreclosure if you default on the loan. It states your and lender legal rights and obligations including your responsibility to make your mortgage payments (principal and interest) and pay real estate taxes and insurance on time.A Deed of
Trust is used in place of a mortgage in some states. By signing a
deed of trust, the borrower transfers the legal title for the property to the
trustee until the loan balance is paid. If the borrower defaults in the payment
of the debt, the trustee may sell the property without legal proceedings.
The Note
is legal document that acknowledges a debt and promises to pay according to the
agreed terms of the loan. It also recites the penalties and steps the lender can
take if you fail to make your monthly mortgage payments.
The HUD-1
Settlement Statement must be signed by both you and the seller.
The
Truth-in-Lending Statement is required by the Truth-in-Lending act.
It discloses the terms of the loan, including the interest rate, the loan
amount, the annual percentage rate (APR) and the total payments required. If no
changes in the loan terms have taken place since the loan application than this
form isn't required.
The Initial
Escrow Statement itemizes the estimated taxes, insurance premiums and
other charges anticipated to be paid from the escrow account during the first
twelve months of the loan. It lists the escrow payment amount and any required
cushion. An Annual Escrow Statement must be also delivered to borrower once a
year.
The Mortgage Servicing Disclosure Statement discloses to the borrower whether the lender intends to service the loan or transfer it to another lender.Make sure you know exactly when and where you should send your first and
subsequent payments and what the penalties are for being late.
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Disclosure
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