Mortgage Closing Process
There are few aspects of buying a home that cause as much confusion as the mortgage closing process. It is actually rather straight-forward, and takes place after the mortgage has been approved and all stipulations of the loan and sales agreement have been met and approved. Mortgage closing is generally scheduled by the lender at a convenient time for all parties.
Pre-Closing
Before the mortgage closing process can take place, a great deal of work must be completed. The buyer must place an offer on the home and reach an agreement with the seller. After this, the loan application and approval process takes place, followed by home inspections and any final document requests from the lender. When the seller and buyer have satisfied all requirements, the loan is scheduled to close.
During this time, the following steps are completed:
- Buyer gets preapproved for a mortgage
- Buyer makes an offer on a home and the seller accepts the sales contract
- Loan application is submitted and the lender provides a Good Faith Estimate of loan costs
- Escrow company requests preliminary title work and completes other requirements of escrow
- Property is inspected and appraised
- HUD-1 Settlement Statement is prepared and provided within 1 day of closing to outline final costs of closing
Final Process to Closing Loan
To prepare for closing, it is important to gather all of the documents you have received throughout the home buying process. This includes the Good Faith Estimate (GFE), purchase contract, proof of title search, proof of homeowners insurance and mortgage insurance (if necessary), home appraisal and home inspection reports.
The closing process will require that you sign any legal documents, including the agreement between you and the lender about the mortgage terms and the agreement between you and the seller about transferring property ownership. Make sure you read all documents carefully.
Next, you will pay closing costs and escrow items. Closing costs may be rolled into the new mortgage, in some cases, or the lender may agree to pay closing costs in exchange for a higher interest rate. You may have to bring money to the table.
The closing agent will be present at closing to conduct the meeting and ensure all documents are signed and recorded and all fees are paid and distributed. Your closing will most likely take place at the settlement agent's office, which may be a title company. In some areas in Southern California, it is more likely to meet at the lender's office or Escrow company.
Some closings are also witness-only, which means an attorney or notary will travel to the buyer and seller to provide the documents and disbursement services.
The documents that will be signed include:
- The HUD-1 Settlement Statement which details all closing costs.
- Final Closing Disclosure which outlines your loan costs and APR.
- Mortgage note stating your promise to repay the mortgage.
- Mortgage or deed of trust to secure the mortgage note.
After reviewing and signing the closing documents, you will receive the keys to the home and the process will be complete. You will be allowed to take possession of your new home immediately or soon after closing, unless there is another arrangement with the seller.
