Purchasing a home is a great investment. The closing, or settlement as it’s called in some states, is one of the most important parts of the process. This is when you legally commit to your mortgage loan. Here’s a rundown of items to help you know what to expect and how to prepare.
Key Steps to Getting the Keys
Check out a list of key steps that will need completed during your transaction.
Find a property
Make an offer
Sign the Purchase Agreement
Get funding
Get insurance
Most lenders require you to pay a year of premiums up front for homeowner’s or property insurance. If your loan includes an escrow/impound account, the account will be set up for you to make monthly payments toward your future taxes and insurance on the property.
Don’t forget to make the smart choice and purchase an owner’s title insurance policy and protect your financial investment. For a one-time fee, an owner’s title insurance policy provides coverage for as long as you own your home.
Close the Transaction
In most of the country, a title or settlement agent handles your closing. In other states, particularly states in the West, the person is called an escrow agent. In other states, particularly in the Northeast and South, an attorney may be required.
During the closing, or settlement as it may be called in your area, you will sign many documents. Some key documents that you will sign include:
- Closing Disclosure: This form contains the terms and costs of your transaction. By law, your lender must provide the Closing Disclosure to you three days before your closing.
- Promissory note: This document is your promise to repay the loan (mortgage) to your lender. The note provides details regarding your loan, including the amount you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment and the where the payments are to be sent. The note also explains the consequences of failing to make your monthly mortgage payments.
- Deed of trust: This document, which may also be called a Security Instrument or Mortgage, transfers legal ownership of the property with the condition that the lender may foreclose on your home if you fail to repay your mortgage. This document restates the basic information included in the Promissory Note, as well as explains your responsibilities and rights as a borrower.
