For both your Loan Officer and you, this is fantastic news! It means we have all the necessary documentation and your loan has been approved. We’re ready to close the deal and get you into your new home.
A few days before your closing date, your Loan Officer will contact you to review the final details, ensuring there are no surprises on the big day.
What Happens at the Closing?
The closing is when you finalize your home loan and officially become the homeowner. It typically takes place at the office of a title company or attorney who acts as our agent. If you’re purchasing a home, the seller might also be there to transfer ownership, though in some states, this happens separately.
During the closing, you will review and sign several legal documents. Don’t worry, the closing agent or attorney will be there to answer any questions you have, or you can ask your loan officer if you prefer.
Key Documents You’ll Sign at Closing
We hope you have been practicing your signature because you’ll be signing a large stack of papers. Here are the most important documents you need to know about:
Closing Disclosure (CD):
This document provides a complete breakdown of all the final fees associated with your loan. If you’re buying a home, it also lists fees related to the transaction between you and the seller. For refinances, it shows the payoff amounts of any existing mortgages.
The Closing Disclosure replaced the HUD-1 and Truth-in-Lending Statement for most loans since October 2015.
The Promissory Note (The Note):
This is the document where you agree to repay your mortgage. It lays out all the details of your loan, including the interest rate, the length of time to repay it, and the penalties you may face if you fall behind on payments. This is your official promise to pay.
Mortgage or Deed of Trust:
This document pledges the property to the lender as security for the loan repayment. In simple terms, it means the lender can take ownership of the property if you fail to make your mortgage payments. The Mortgage or Deed of Trust restates the basic information from the Promissory Note and details your responsibilities as the borrower.
If you’re refinancing, Federal Law requires that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won’t be disbursed until three business days have passed.
Understanding Your Closing Costs
A home loan involves a variety of fees, such as appraisal fees, title charges, and local taxes. These fees can vary by state and lender. We take great care to provide a complete and accurate estimate of your closing costs.
Here’s how we group them for clarity:
Third-Party Fees
Fees collected and passed on to a third party that performed a service. Examples include:
- Appraisal Fee: Paid to the appraiser.
- Credit Report Fee: Paid to the credit bureau.
- Title Insurance Fees: Paid to the title company or attorney.
Other third-party fees may include the settlement or closing fee, the survey fee, tax service fees, flood certification fees, and courier/mailing fees. Fees may vary between lenders based on their negotiated rates.
Taxes and Other Unavoidable Fees
These are fees you will likely pay regardless of the lender you choose. They include state and local taxes and recording fees. If a lender’s quote seems too low, it may be because they haven’t researched these unavoidable fees to provide an accurate estimate.
Lender Fees
These are fees that the lender retains in exchange for the loan, such as:
- Discount Points: Fees paid to lower your interest rate.
- Loan Processing Fees: Charges for processing your loan application.
This is the category you should compare most closely when shopping for a lender.
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Other Potential Expenses
You may need to prepay some items at closing that are due in the future.
- Per Diem Interest: All our mortgages have a payment due date of the first of the month. At closing, you’ll pay the interest from your closing date through the end of the month. This means your first mortgage payment won’t be due until the following month. For example, if you close on June 15, you’ll pay interest for June 15-30 and your first mortgage payment won’t be due until August 1.
- Escrow Account Deposit: If you have an escrow or impound account, you’ll make an initial deposit at closing to cover future property taxes and insurance premiums.
- Homeowner’s Insurance: For a home purchase, you’ll need to pay for your first year’s homeowner’s insurance premium before or at closing.
- Mortgage Insurance: If your loan requires mortgage insurance, up to two months of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.
So, there you have it, what you can expect on your closing day. We know it’s a lot of information, so please don’t hesitate to contact your Loan Officer with any questions you have to feel confident on your big day!
