January 8th, 2020 2:44 PM by Jackie A. Graves, President
Closing on a house
marks the beginning of a new lifestyle for homeowners since ownership of the
home is transferred. Here’s what to expect at the closing and how long it takes
to close on a house.
What are closing costs?
Closing costs are the
fees and expenses that the homeowner must pay before he/she becomes the legal
owner of the house, condo or townhome. Expect to pay 2 percent to 5 percent of
the mortgage loan in closing costs. Fees vary in each state and some have
The closing costs
include setting up escrow accounts to paying for a title search appraisal and
checking a consumer’s credit history. Whether you are purchasing a new home or
refinancing a mortgage to receive a home equity line of credit or home equity
loan, closing costs need to be paid.
a software company that processes mortgage applications, reports that the
average time it takes for homebuyers to close on their home purchase was 47
days as of October 2019.
a house can be a lengthy process and planning is crucial, especially if you are
currently renting a home or an apartment and your lease is almost up.
usually takes 30 to 60 days, but a number of factors can change this timeline.
Renters should aim to close toward the middle to end of the month, says Jared
Maxwell, vice president of consumer direct lending at Embrace Home Loans in
Middletown, Rhode Island.
help prevent paying your final month of rent for an apartment or house you
aren’t using,” he says.
On the flip
side, the closing date would also depend on how quickly the seller can move out
of the home, so the buyer may be in a hurry, but the seller may have a
A rule of
thumb is to expect at least 30 days to closing because it gives the buyer and
the lender an opportunity to complete all the paperwork.
certainly instances where lenders can close in as fast as 15 to 20 days, but
this assumes documents are returned quickly and there are no unforeseen hurdles
that occur with the condition of the home or the title report,” Maxwell says.
for a loan preapproval before you start shopping for a home can help people
close sooner since a few of the verification processes will be completed ahead
of time, says John Schleck, a senior vice president in consumer lending at Bank
of America in Charlotte, N.C.
your participation will involve a couple of steps:
usually a cashier’s check made out to the escrow company or a wire transfer
funds to the banking institution.
Be sure to
find out what type of identification is required. Usually, only one type of
identification is needed, though some companies require two. Government-issued
identification, such as driver’s licenses and passports, are normally accepted.
Closing costs are typically
thousands of dollars and homeowners should plan on paying 2 percent to 5
percent of the mortgage loan. The costs can be rolled into the mortgage amount
(known as a no-closing cost
mortgage) or paid up front, and some components of closing costs can
also vary by state. Some states and localities charge mortgage and transfer
taxes that increase the costs in that state, Maxwell says. Lenders are required
to provide an estimate of your closing costs early in the loan process and
closer to the closing date an amount you can expect to bring to closing.
example, the sale of a $200,000 home in Illinois means the buyers will pay
title fees that begin at $1,700, escrow fees at $1,500, survey fees of $400 and
attorney fees that average $400, says Neil Narut, senior underwriting counsel
for Proper Title, a Chicago-based title company. There are many more items on
top of that.
can prepare for a closing to help speed the process. Buyers should obtain
beforehand all the documents that the loan officer will request, Maxwell
refrain from making any large undocumented deposits such as cash deposits and
opening any new credit card accounts,” he says.
want to make sure nothing in their finances changes before the closing day
because the lender does make last-minute checks of vital information.
procedures vary from state to state and even county to county, but the
following parties will generally be present at the closing or settlement
agent conducts the settlement meeting and makes sure that all documents are
signed and recorded and that closing fees and escrow payments are paid and
things occur on the day you close. Prepare to spend a few hours on this
will conduct a walkthrough with their realtor to confirm the home is in the
condition promised. Plan to obtain a certified check from the bank that is made
out to the title company for the closing costs and the remainder of your down
payment, Maxwell says.
three main documents to sign during closing, including a deed of trust or
mortgage, which is a document that puts a lien on your property as collateral
for your loan, Schleck says. The second document is the promissory note, a
legal agreement to pay the lender, including when you will make your payments
and where you will send them. The last one is the closing disclosure, an
itemized list of your final credits and charges
sellers will sign a few documents and you will receive the keys to your new
home,” Maxwell says.
factors can cause delays to the closing. One common item that can cause a delay
is if there is a repair that the appraiser believes needs to be addressed,
factor is a lien on the title that the seller is unaware of that must be
satisfied before the closing can take place. A homeowner can cause the delay if
he/she lacks some of the documents that the lender needs to conduct the
beyond three months are rare, says Mike Tassone, co-founder and COO of Own Up,
a Boston-based mortgage company. The causes include finding issues with
obtaining a clean title to the home such as tax liens, and previous owners
unreleased from title as well as negotiations related to appraisals that come
in below the purchase price.
the mortgage process, it’s important to complete applications accurately and
upload documents in a timely manner to ensure things move smoothly,” Schleck
says. “Depending on market activity, there may be some delays as third-party
providers such as appraisers tend to get very busy during peak homebuying
receive the following key documents:
The loan estimate. This document
contains important information about your loan, including terms, interest rate
and closing costs. Make sure all the information is correct, including the
spelling of your name.
closing disclosure. Like the loan estimate, the closing disclosure outlines
details of your mortgage. You should receive this form at least three days
before closing. This window of time gives you a chance to compare what’s on the
loan estimate to the closing disclosure.
initial escrow statement. This form contains any payments the lender will pay from your
escrow account during the first year of your mortgage. These charges include
taxes and insurance.
note. This document states your promise to repay the mortgage.
It indicates the amount and terms of the loan and what the lender can do if you
fail to make payments.
or deed of trust. This document secures the note and gives your lender a
claim against the home if you fail to live up to the terms of the mortgage
of occupancy. If you are buying a newly constructed house, you need this
legal document to move in.
reviewed and signed all closing documents, the house keys are yours and you
will officially be a new homeowner.
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