The home buying and mortgage process can be overwhelming even for seasoned home owners. Knowing what to expect and how to navigate ‘the maze’ will help.
Paperwork, Paperwork and more paperwork… ~
There are really two transactions when buying a home. One involves the property and the other involves the mortgage. And with both comes paperwork.
Below are some documents you’ll receive and sign at the escrow/title company ~
• HUD 1 – this is probably one of the most important documents to review carefully, as it will contain all the actual settlement costs and who is responsible for which cost, buyer or seller. The closing agent will go over this document thoroughly with all parties.
• Deed of Trust – this is a document wherein legal title in real property is transferred to a trustee, which holds it as security for a loan (debt) between a borrower and lender.
Below are some documents you can expect to receive and sign regarding the mortgage loan ~
• Monthly Payment Letter: this document reveals the breakdown of your monthly payment into principal and interest, as well as property tax and/or home insurance, if applicable.
• Truth In Lending Statement: this important piece of paper will disclose the interest rate, annual percentage rate, amount financed and total cost of the loan over its life. These are very important numbers to check and double check before signing. This isn’t a time for surprises.
• Itemization Of Amount Financed: this document is like an addendum to the Truth in Lending, summarizing finance costs and points.
• The Note: this paper puts a lien against the house as security for the loan — allowing the bank to foreclose if you default on the note mentioned above.
Some other documents you will receive and sign during the process ~
• Name Affidavit – this document certifies that you are, in fact, who you say you are.
• Search or Abstract of Title – this document gives a history of every document that’s been recorded about this particular piece of property.
Show me the money ~
The buyer and sometimes even the seller are expected to have money ready to hand over. You should be informed of the amount you need to provide before you sign the loan documents. If you aren’t informed, do call and ask. You’ll want to bring a certified check for the correct amount.
Here are a few things a buyer will be paying for at the closing ~
• Closing costs – these include loan fees, title/escrow and appraisal. These can vary from state to state and county to county.
• Payment for the house – this includes the down payment minus any earlier deposit(s). It’s given to the closing agent (title/escrow), along with the lender’s check for the balance of the purchase price.
• Escrows/Impounds – this is when the property taxes and home insurance are paid with the mortgage payment to the lender. An account will be established prior to closing. The amount due depends on closing date
Timing is essential, so here are a few things to keep in mind ~
If you’re renting, you’ll want to schedule the closing around your lease expiration date.
If you plan to fix up the new home before moving in, schedule the move in date a couple of months before you have to move from your rental.
If you’re selling your current home, you’ll be juggling between two closing dates. Most people require the cash from the sale of the current home to pay for the new home, so be sure to calendar the closings accordingly. But take heed! Two closings in one day will make for a stressful experience, but if timed correctly, it will go off without a hitch.
• Make sure the closing date is set before your interest rate lock expires.
• If you’re closing on the new home purchase at the end of the year, keep taxes in mind. Any points and interest paid before the New Year can become deductions for this year’s taxes. Check with an accountant for the timing of any other deductions.
Keys Please…The End, or is it ~
A closing may be the end of the buying process, but it’s the opening act of your new life as a homeowner.
I’m here to help in any way I can. Please feel free to contact me.