You and your family are finally ready to move to your new home. Your mortgage loan was approved, your house passed inspection, your belongings are packed, and everyone is looking forward to moving day. All that’s left is to attend your closing.
What Is A Closing?
A closing is a meeting that involves all of the parties signing the final documents and legally transferring the property to you. There are costs and fees in this final step which you need to be aware of.
Who Will Be There?
Usually, the closing takes place at a title company or an escrow office. The following individuals should be there or be represented:
- You and any co-borrower (such as your spouse), if they’re involved with the transaction
- Escrow officer
- Closing agent
- The seller’s real estate professional
- Your real estate professional
The thing you’ll probably remember most years later is how many times you had to sign your name. There are lots of documents that need your signature. Here’s an overview of what will happen:
- You will sign a promissory note indicating that you have accepted the mortgage loan from your lender and agree to repay the amount borrowed, plus interest. You also will sign a security instrument which pledges your home as collateral for the loan. In some states this document is a mortgage and in other states it is a deed of trust.
- At closing, your lender will transfer the money to the seller on your behalf. The seller will then sign a document called the deed, transferring ownership of the property to you.
- The title company or settlement agent will prepare all the documents and make sure that they are properly recorded.
- Additionally, there will be several affidavits and declarations for you to sign. These legally binding documents spell out the financial obligation you are taking on and your rights as a homeowner.
Make sure you understand what you’re signing. It is important to read the documents carefully. Don’t hesitate to ask questions. Sometimes real estate professionals or mortgage loan advisor will go over the documents in detail before the actual closing, so you are comfortable with the process. If that seems like a good idea to you, be sure to ask your real estate professional to spend time with you explaining the paperwork.
The Documents in More Detail
Here’s a little more detail about some of the paperwork you’ll be asked to sign at your closing. Remember, every person who buys a home has to sign this paperwork, no matter the country of origin, income level or native language.
The Mortgage Note
The mortgage note is a legal document that provides evidence of your indebtedness and your formal promise to repay the mortgage loan, according to the terms you’ve agreed to. These terms include the amount you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment and the place where the payments are to be sent. The note also explains the consequences of failing to make your monthly mortgage payments.
The Mortgage or Deed of Trust
The mortgage or deed of trust is the security instrument that you give to the lender that protects the lender’s interest in your property. When you sign the mortgage or the deed of trust (depending on the state where you live), you are giving the lender the right to take the property by foreclosure if you fail to pay your mortgage according to the terms you’ve agreed to. Financing a house is very similar to financing an automobile; in both cases the property is the security for the loan.
A deed is a document that transfers ownership of the property to you. It contains the names of the previous and new owners and a legal description of the property and is signed by the person transferring the property. The deed gives you title to the property, but the title is conveyed to a neutral third party (called a trustee) until you pay the mortgage loan in full.
The closing agent will be responsible for recording this document so that it can be filed as part of your county’s public records. You will receive a copy at closing and another copy after it has been recorded.
Affidavits and Declarations
Affidavits and declarations are statements declaring something to be true, like the fact that the property will be your principal place of residence or that all the repairs needed on the property were completed prior to closing. In most cases you’ll have to sign one or more affidavits at your closing.
When you are finished signing the closing documents, you will be given the keys to your new home. The mortgage process is now complete, and you are officially a homeowner.