What is a Real Estate Closing?

A closing is the most important event in a home buying process. Closing refers to the procedure by which the title to the property is transferred from the seller to the buyer. This procedure is quite elaborate and involves a lot of paperwork and the representatives of all the parties in the deal are present. Closing can cause a lot of anxiety in the minds of first time home buyers. The buyer should have a thorough knowledge of what closing entails, for the process to be completed smoothly without any last minute hitches. For the the closing to be perfect all the parties should be fully prepared. As the buyer is most affected by a closing he/she should be fully prepared for the event and make sure that others are also fully prepared.

Before the day of closing you, the buyer, must be ready with all the paperwork that you had received during the home buying process. They usually include the Good Faith Estimate, proof of title search, contract, home appraisal and inspection reports, private mortgage insurance, home owner’s insurance, etc. This is your opportunity to make any last minute changes if you so desire and others agree. Usually contracts allow you to make a final walk through inspection of the property, 24 hours before the closing, to make sure that the property has been fully vacated and the changes or repairs agreed to, have been made.

Usually the closing takes place in the closing agent’s office, in a conference hall. Depending on individual state laws and customs the closing agent may be an attorney, a title company or an independent individual. The job of the closing agent is to complete the real estate transaction according to the terms of your agreement/contract. The other people usually present on closing day are the title company representative, the buyer and buyer’s representatives like real estate agent and attorney, the seller and his/her representatives and the mortgage lender.

At the closing you will be required to sign some legal documents. They are of two types, the agreement between you and the seller to transfer ownership of the property and the agreement between the you and the lender regarding the mortgage terms and conditions. You must be sure to study all the documents and also take the help of your attorney and understand the consequences of everything contained therein. Be sure not to sign any blank papers or documents containing blank spaces. Typically the documents to be signed include a mortgage note, HUD-1 settlement statement, mortgage or deed of trust, the certificate of occupancy, and final TILA statement.

Closing cost is one of the most important factors in a closing and its quantum comes as a surprise to most buyer’s. Closing cost is the amount to be spent on closing day and is usually borne by the buyer. This includes real estate agent and mortgage broker commissions, escrow and title fees, insurance fees, loan origination fee, appraisal fees, notary and public filing fees, money wire and courier fees, attorney fees. Closing cost can vary from 3% to 5% of the cost of the property and thus comes to a tidy sum. If you are not careful you can end up overpaying. The buyer can even ask the lender to pay the closing cost and the amount added to the total loan amount.

Once you and the seller have signed all the necessary documents, the closing agent will record in the county land records all warranty and security deeds, return the completed loan package to the lender, disburse all funds as per the HUD-1 Settlement Statement and finally hand you the house keys because the house is now officially yours. Real estate closings vary from state to state but the above is an overview of what you can expect to take place

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