Closing on your home: Are you walking in blind?
By the time you arrive at the table to close on your home purchase, you're tired. It's been a long haul to get to this point, and the last thing you want is any kind of surprise.
Particularly if you're a first-time homebuyer, knowing ahead of time what to expect at closing can help ease any anxieties you may have, and ensure that you get your keys with no unforeseen hiccups.
The good news is, if you have worked with a trustworthy real estate agent and have chosen a reliable mortgage lender, you should anticipate a smooth settlement. All the professionals you've been working with are helping you get through the final steps of the transaction.
"Buyers should not expect any surprises at the settlement as long as they have carefully reviewed their Good Faith Estimate (GFE), shopped for their title services and compared written estimates of closing costs," says Todd Ewing, president of Federal Title and Escrow Co. in Washington, D.C.
What should you be doing in the weeks and days before your closing?
Homebuyers should stay in close touch with their real estate agent and lender in the days leading up to the closing to be certain all the necessary documents and financial arrangements for the mortgage are in place. Be particularly careful not to apply for additional credit or use your credit cards more than usual, since mortgage lenders typically check homebuyers' credit again immediately before settlement.
As the homebuyer, you will do a walk-through of the property just prior to settlement to check on the condition and any repairs required by the contract.
Diana Breazile, director of operations at HouseTech, Inc. in Hermosa Beach, Calif., says buyers can also ask for an updated GFE or a fees worksheet as much as one week before the settlement.
"The first GFE is usually prepared at the very beginning of the transaction, so buyers should get a better estimate closer to settlement," says Breazile.
You can request other paperwork to review ahead of time, as well. "Buyers should request their HUD-1 settlement statement at least one day before the closing to have time to read it and prepare questions for their lender or the settlement attorney," says Lee Leslie, an attorney and founder of HouseTech.
Day of the closing: What to bring
"For one thing, bring a strong hand, since you will need to sign papers an average of 60 times in one settlement," says Ewing.
In addition, Ewing says that you'll need:
- photo identification;
- a copy of your GFE;
- a certified check or a cashier's check for closing costs (unless you have wired cash ahead of time);
- your regular checkbook, because closing costs can change a little from estimated closing costs.
If your closing costs were overestimated, you should receive a refund of any overpayment within a few days.
Players around the settlement table
Ewing says that the most common participants in closings are the settlement attorney, the sellers and their real estate agent, and the buyers with their real estate agent.
The settlement attorney or escrow agent who handles the closing does not represent either the seller or the buyer. "The settlement attorney is a neutral party simply there to walk everyone through the closing process," explains Ewing.
Ewing also notes that a loan officer rarely attends the closing, though his or her presence "can be helpful if there are any issues with the loan documents."
Occasionally sellers will sign documents in advance or remotely, since the sellers have far fewer documents to sign than the buyers.
Do you need your own lawyer?
In most jurisdictions, lawyers representing the buyer or seller are not required for settlement. That said, certain experts don't always agree on the importance of a lawyer at your closing. "In some jurisdictions each party hires their own attorney, but really there should not be anything left to negotiate by the time you get to settlement unless there was a problem at the walk-through that needs to be resolved," says Ewing.
Leslie agrees: "A lawyer is generally only needed if you are making a unique purchase that requires complex legal documents."
"While a lawyer is not required, having one there to represent your interests, especially for first-timers, can be quite valuable," said Keith Gumbinger of HSH.com.
What to go over with a fine-tooth comb
When faced with a thick stack of documents, you may be tempted to blow through the signatures without carefully reading anything. However, there are a few forms that should be reviewed especially carefully.
"The most important document that buyers need to read is the HUD-1 settlement statement," says Ewing. "Buyers should bring their GFE with them to the closing to compare the estimate with the final document and to make sure they are being charged appropriately for their loan, legal fees and title fees."
The HUD-1 will list how much the homebuyers are required to place in an escrow account for property taxes and insurance, which Breazile says sometimes confuses buyers. Some loans can require as much as six months of payments placed into an escrow account at the closing.
Ewing adds that homebuyers should check the note to make sure the total amount borrowed, loan terms and interest rate are correct.
The Truth-in-Lending document will also confirm the interest rate and type of loan.
The other settlement documents are generally non-binding disclosure forms that essentially signify that the borrower has received them.
After the last page is signed, you'll get copies of each document for your personal records. Yet that's not what you came for: You'll also get, finally, the keys to your new home. The homebuying process is complete.
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