The Big Day!
The big day is here! Tonight you can pop open the champagne, but today there will be a lot of paper signing and a poignant passing of the keys (don’t forget the garage keys and electric door opener, too).
At the settlement there will be an attorney or title company representative (chosen by the buyers), all buyers, listing and selling brokers, and all owners. The home seller should bring all warranties on equipment and any instructions on equipment maintenance or operation.
The attorney will have searched the title, provided title insurance, and obtained old and new lender instructions. First, all unresolved walk-through deficiencies are resolved.
With the buyer, the attorney explains the deed of trust or mortgage; the deed of trust note or mortgage note; VA, FHA, or lender forms; and settlement sheets. Buyer signs all these and pays the balance of the down payment and buyer’s closing costs with cashier or certified check.
Open Look At Closing Costs
“Closing costs” have lost much of their mystery in recent years.
Under the Real Estate Settlement Procedure Act (RESPA), the homebuyer is furnished an estimate of closing costs by the lender, in advance of the closing. In some cases, some of the closing costs may be paid by the seller; this is particularly true for new housing, where the seller is the builder.
Settlement fees vary widely depending on price, location, and other factors, but overall the buyer’s costs usually average between 3% and 7% of the sales price. Items that are usually included in the settlement fees are the loan origination fee, mortgage insurance premium (M.I.P.), attorney fees, owner and lender title insurance, recording fees, county tax stamps, state tax stamps, and the survey fee. In addition, the lender will require an appraisal fee and a credit report fee in advance of the closing.
A few other items, not required to be listed under the law, may also have to be paid at a closing. These include advance deposits held in escrow for real estate property taxes and insurance. The lender collects a portion of these every month and then pays the insurance and taxes when they are due.
Sometimes closing costs can amount to a sizable sum. Remember that some of the items are tax deductible. Check with your tax advisor.
Signing On The Dotted Line
With the seller, the attorney explains the settlement sheets and gets the home seller’s signature on them and the deed. Seller pays appropriate closing costs.
If the seller’s taxes or insurance have been escrowed, the seller will receive any money accumulated in the account for bills not yet due. Additionally, the seller will be reimbursed for any money paid in advance and not used, such as property taxes. The seller will receive these refunds at or after settlement, depending on the area. Taxes and homeowners association dues or condominium fees will be prorated on a daily basis. Seller, buyer, and brokers are supplied a copy of settlement sheets for their records.
The house keys are passed. You are now the proud owner! Congratulations!