The Mortgage Closing

You’ve done the work of finding a new home.  You’ve negotiated the price, had it inspected, and convinced the bank you’re worthy of a mortgage.  The entire home buying process comes down to the final hour you spend around the desk of a broker or attorney – the closing.

When you finalize all the paperwork for a new home, you “close” the home mortgage deal.  This is called the closing and it essentially wraps up all of the work you’ve done up to this point.  Large stacks of papers will be signed, money will change hands and finally, keys will be exchanged.  At the end of the closing process, you will actually own a new home with a new mortgage loan and mortgage payment, of course.

On the mortgage loan closing day, the buyer and seller will sign the papers closing the home sale and mortgage loan transaction and ownership of the property will be transferred to the new homeowner.  This is the last step in the mortgage loan application process.

Most all purchase contracts entitle the buyer to a walk through inspection of the property the day before the closing.  The walk through should be used to make sure that the seller has vacated the property and left it in the condition specified in the contract.

The closing agent, usually from a title company, will make sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed.  The documents that are commonly found at the closing include: the mortgage, the mortgage loan note, a Truth-In-Lending disclosure, HUD-1 settlement statement.  At the closing the following parties may be present; the closing agent, attorney for the borrower, seller of the home, the real estate agent for the seller, the mortgagor or  borrower and the mortgagee or mortgage lender.

Be sure to read all documents carefully before signing them, and do not sign forms with blank lines or spaces.  If there are any major problems you may be stuck with them for a long time if they are not cleared at the closing.  When reviewing the home loan documents, look to see that they are similar to those received at the time of the mortgage loan application.  All the numbers should be verified in advance use the mortgage calculators to verify the monthly mortgage payment, loan amount and total finance charges.  The borrower may also want to verify the closing costs and the mortgage rate along with the APR with the closing costs mortgage calculator. 

The closing agent will be responsible for preparing or ordering all the documents for your closing.  However, you are responsible for some documents and paperwork that is required to be at the closing.  At a minimum you will generally be responsible for the following documents:

Your new homeowner’s insurance policy and any other required insurance policies you’ve taken out, along with proof of payment.  In most cases the mortgage lender will require a review of the homeowner’s insurance policy and proof of payment prior to scheduling the closing.

A certified check for all closing costs, including the remaining portion of your down payment.  You can get this figure a day or two before your closing from your closing agent.  You are entitled to a copy of the HUD-1 Settlement Statement a minimum of 24 hours prior to the closing of the mortgage loan.  This statement itemizes the services provided and fees charged to you.  These fees should be negotiated prior to the closing not at the closing unless there are errors in the numbers.

Before the closing gather all the paperwork you have received throughout the home buying and mortgage loan process, including the good-faith estimate, purchase contract, proof of homeowner’s insurance, home appraisal and home inspection reports.  You may want to refer to these documents at the closing.

The key documents at the closing will include:

The HUD-1 is a precise record of all the settlement costs or charges for the home loan and the home purchase.  The HUD-1 will show the sales price, down payment, earnest money deposit, mortgage loan amount, mortgage loan closing costs and any credits form the seller.

The Truth-In-Lending disclosure covers the actual mortgage rate of interest, the APR on the loan, the total finance charges, the repayment terms, and conditions of the home loan such as a balloon or adjustable rate mortgage feature.

The note is the home loan agreement between the borrower and the mortgage lender.  The note is a promissory agreement that covers the amount borrowed, the length of the mortgage loan and the interest rate.

The mortgage is the document that pledges the property as collateral for the home loan agreement.

Numerous other documents will need to be signed as well such as the mortgage loan servicing notice, a final mortgage loan application.

Ultimately, it is your responsibility to understand and agree with everything you are signing, so be sure you are reading and processing all of the information presented at the closing.  Then, when the paperwork is done and the keys are exchanged, you can rest assured that your home is truly your own with no complications or string attached – other than your new mortgage.

As basic as it sounds, make sure you know when your first mortgage payment—and all subsequent regular mortgage loan payments—are due.  Most homeowners make monthly payments, but some mortgages are structured with payments every two weeks.  Most mortgage lenders provide a coupon book clearly listing due dates and the correct mailing address and a monthly coupon to send with the payment

Once all the documents are reviewed and signed, the house keys will be given to the new homeowner that homeowner will be in possession of a new home, mortgage and home loan.