Closing Your Home Loan
July 3, 2015

You have agreed to terms with the seller for your new home, and are now preparing to enter the closing phase. Unfortunately, closing on a house is considerably more complicated than buying a new appliance, or even a car.

The closing process typically takes 30-45 days and requires several preliminary steps before the actual closing day. By the time you reach the actual closing day, the mortgage loan must be secured and approved; escrow accounts are established; home inspections and appraisals have been completed; the title search has been performed and title insurance purchased on the clear title; the interest rate has been locked; insurance has been acquired; and any contingencies such as a low appraisal value and repairs have been addressed.

As the closing day approaches, all of the financial flows and expectations will be finalized. Your closing agent or attorney will prepare a Closing Disclosure document that summarizes all of the money transfers that will take place at closing. There are two primary sections: one that serves as a sort of balance sheet of the money transactions between buyer and seller, and another section that itemizes all the other settlement charges and the recipient.

You should receive your Closing Disclosure three business days before the closing settlement meeting when all of the legal documents are signed. A sample closing disclosure form may be found here .Go over this carefully, comparing it to the original Loan Estimate you received. If you have an attorney, ask them for assistance in reviewing documents and contact the lender to clear up any discrepancies.

The day before closing, you should be able to do a final walk-through of the home to make sure that everything is as promised in the contract, and any contingent repairs are correct and complete. If you do spot any problems, you have the option to delay the closing until the issue is resolved or ask the seller to place money to complete the repairs in an escrow account.

Assuming everything is fine with the home, you have finally made it to the closing day for the settlement meeting. Bring all of the relevant documentation you have acquired such as proof of insurance, title information and appraisal/inspection reports. Verify with your lender how you will pay for any closing costs and down payments that aren’t rolled into your loan. Electronic transfer may work, or you may be required to bring a cashier's check or your regular checkbook.

Closing meetings vary by region, but generally the following people will be present aside from you: the closing agent, any attorneys representing buyer or seller, a title company representative, a representative from the lender, the home seller, and the seller's real estate agent. For a refinancing, the meeting could only contain you and the lender's representative since you are closing on your existing home.

During the closing meeting, you will pay any closing costs not rolled into the loan and sign all the legal documents that cover the terms of the mortgage and the agreement to transfer ownership. As painful as it may be, take the time to review all documents to understand what you are signing. Do not sign documents where blank spaces are present, and ask for clarification if necessary.

You will receive the promissory note, a glorified IOU reiterating the loan terms and the lender's options should you fail to make your payments. You will also receive the mortgage or deed of trust that secures the note, and a certificate of occupancy if you are buying a newly constructed home.

In the case of a refinancing, you will also receive a notice of the Right to Rescind letting you know that you have three business days (Saturdays included) after the documents are signed to change your mind and cancel the loan without penalty. The right to rescind only applies to refinancing or home equity loans with a new lender for a primary residence. Thanks to this quirk, with refinancing you have a few days of overlap where you are still paying interest on the old loan while the new loan interest has already started accumulating. Work with your escrow agent to minimize the overlap and save yourself a few dollars.

Congratulations! You made it through the process and you have a new home – or in the case of refinancing, a new loan on your old home. Relax and enjoy. You've earned it. Now where is that moving van with all of your worldly possessions?

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