Closing on the house and loan
Once you've scheduled and had a home appraisal done, along with a title search on the property you're interested in buying, the final step in buying your new home is called the closing, or settlement.
The closing statement
Before the closing, you'll receive a good faith estimate in writing from the lender listing the settlement costs you can expect to pay at the closing — usually adding up to anywhere from 2% to 10% of your loan, depending on the rate you're paying and where you live. On a $150,000 loan, this means you'll need between $3,000 and $15,000 for closing costs. At the meeting, the lender will provide the closing statement, or settlement statement, itemizing all of the final costs. By law, you have the right to see the statement one day before the closing to avoid any mistakes or surprises.
Closing day
Usually what happens at closing is that the parties involved in the transaction, or their representatives, meet — though the actual process varies from state to state. This can include the home's buyer (you), the seller, their attorneys, representatives from the title company and possibly others. If you're at the closing, you and the seller sign the documents that legalize the transfer of property, and you sign the mortgage note and loan agreement. Then, you'll write what may seem like a huge number of checks for the balance of the selling price and the closing costs, including:
- Title searches and title insurance, to protect the lender and you against any potential legal claims to the property
- Attorney fees
- Property taxes to reimburse the seller for amounts that have already been paid
- Transfer taxes
- Prepayment of property taxes and homeowners insurance to lender so that money is available to pay these bills as they come due
If an escrow agent handles your closing, representatives for you and the seller sign the papers, handle the payments and then mail you the documents once the transaction is completed.
