The Closing Process
Let’s start at the very beginning — what does “closing,” “settlement,” or “closing escrow” on your house mean?
Closing – or settlement as it is known in some parts of the country — is a term used for the point in time at which the title to the property is transferred to the buyer and, generally, a mortgage (or “deed of trust”) is given by the buyer/borrower to the lender.
Buying a house is an exciting time and the more you know about the process, the more relaxed you’ll be going through it. Keep reading, and we’ll walk you through what the closing process really means.
Some information about the costs associated with closing on your home should be provided to you before you put a contract on a house. If you are obtaining a loan to purchase the property, your lender has three days from the time of the loan application to provide you with a Good Faith Estimate of your loan costs so there are no surprises about costs.
Once the seller accepts your sales contract, the countdown to closing begins. Timing is essential to make sure all the ingredients for a successful closing are in place for your arrival. If you have given the seller an earnest money deposit, your real estate broker will see that it is promptly deposited into an escrow account where the funds are held until the time of closing.
Next, we search and examine the public records for information related to your home’s title. This provides warnings of title flaws that must be dealt with before the property can change hands. For instance, the previous owner may have failed to pay local or state taxes. Or there may be an outstanding deed of trust or judgement on the property. We work hard to see that such obligations are dealt with and resolve any issues we find well before you go to closing, if possible. If the sales contract calls for a prior mortgage to be paid off, we will order payoff figures from the existing lender. If the buyer is assuming the loan, we handle that as well.
Once we receive payoff figures and instructions from the buyer’s lender, we prepare the HUD-1 Settlement Statement. The HUD-1, as it is referred to, outlines all of the costs for both the buyer and seller associated with the closing.
On closing day, the buyer and seller sign all of the necessary documents to transfer the property from the seller to the buyer. We also collect all of the funds and disburse them to payoff lenders and other parties who performed services in connection with your closing.
Finally, we record all the legal documents needed to complete your purchase.
For more information about the closing process give us a call, or check out the American Land Title Association’s Home Closing 101 Website.
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