Buying or selling a home is often a long, tedious process with many variables involved. One part of the process that everyone can look forward to is the closing. Also referred to as a ‘real estate settlement,’ the closing on a home is the final step before the buyer receives the keys, documents get recorded and proceeds disbursed. While the concept of a closing seems fairly straightforward, there are some important aspects to consider before transferring the deed from seller to buyer. As you get closer to your closing date, familiarize yourself with the real estate settlement process.
Opening an Escrow Account
All parties involved in a real estate transaction, including the buyer, seller, borrower, and lender, want assurance that their funds are safe and secure. As the buying/selling process can take several weeks or months to complete, having an escrow account in good standing can mitigate certain risks and provide peace of mind. An escrow account allows a neutral third party to take possession of all funds relating to the transaction until the real estate has been settled. After closing, the funds are transferred from the escrow account to the rightful parties.
Performing a Title Search
A title search is a crucial part of the home buying process as it helps reveal possible defects in the title of a property. Along with performing a title search comes title insurance. Title insurance essentially acts as a legal safeguard when purchasing a property. There are two primary types of title insurance including lender’s title insurance and owner’s title insurance. While owner’s title insurance is generally optional, it can be a highly valuable tool to have in the event that a problem is found with the title weeks, months, or years down the line.
Completing a Home Inspection
Problems can be present within a home that may not be obvious right away. A home inspection is a necessary step in the real estate settlement process that helps identify any existing problems with a home before closing. If problems are found during a home inspection, the buyer has the opportunity to ask the seller to make repairs or the buyer may decide to cancel the transaction altogether. A final walkthrough of the property is also completed before signing any closing papers to ensure that no damage has been done to the home since the initial inspection, and that any necessary repairs have been made by the seller.
Signing Mortgage Documents
Before a closing can take place, you will need to work with your lender to complete your mortgage. Your lender will ask you to fill out and sign all documents related to your home loan. Your mortgage documents may include a note which represents the amount you borrowed, a name affidavit that certifies who you are, and a truth-in-lending statement which states the loan’s interest rate, amount financed, the annual percentage rate, and the total loan cost. You may also receive a monthly payment letter that breaks down your monthly mortgage payment, as well as an actual mortgage document that secures the real estate as a debt payment.
Endorsing Property Transfer Paperwork
During the real estate settlement process, the buyer, seller, lender, real estate agent, and title agent must all collaborate to complete the property transfer. All documents relating to the proper transfer must be thoroughly reviewed and signed. There are a number of documents involved in this process, including a bill of sale, an insurance certificate, the deed, and a settlement statement which includes all settlement costs. The buyer will also need to review the proration agreements and acknowledgements of reports. Some of these legal documents may need to be notarized.
Transferring Escrow & Other Costs
Once all of the mortgage and property transfer paperwork has been completed, the transferring of payments to the rightful parties can begin. In addition to the funds found in the reserve account, you may be responsible for certain closing costs. These expenses may include appraisal fees, inspection fees, title insurance costs, application costs, and attorney fees. If you are purchasing a home, you will also need to provide the down payment for the home at this time by wire or certified funds.
Learn More About Real Estate Settlement
While the real estate settlement process can be a lengthy endeavor, it is also an exciting one. Most federal mortgage loans close within 30 to 45 days on average, although the type of home buyer program can sometimes extend this timeline. No matter what type of loan you choose, you can expect your closing to be filled with countless contracts, documents, and other types of paperwork that requires your careful review and signature. To learn more about the real estate settlement process or the importance of acquiring title insurance for your new home, contact the title service professionals at Mathis Title Company.