The closing process
Preparing for closing
Several important steps need to be taken in the final weeks before the closing. The title company carries out some of these, including conducting a title search and preparing to issue title insurance. Most of this time, however, is needed by your lender in order to approve your loan and prepare the corresponding documents.
You can deal directly with the escrow officer or loan officer if you have any questions regarding these steps, but your REALTOR® can also assist in keeping you informed and working to resolve issues which might arise.
Understanding closing costs
Buyer’s closing costs can usually be classified as loan-related, escrow-related (including government fees) or prepaid items (such as property taxes, interest and insurance). Your expenses will almost always fall into one of these three categories.
As a result of negotiations between buyer and seller, the seller may pay for some of these charges at the time of closing. Make sure any agreement regarding exactly who will pay for what (and in what amount) is specified in the sales contract.
Mortgage-related closing costs can vary, but the following are commonly paid at closing, if not paid by the buyer earlier in the process (such as appraisal fee):
- Loan origination fee
- Loan discount points
- Appraisal fee
- Credit report fee
- Prepaid interest
- Escrow accounts
- Mortgage insurance
Setting a closing date
A closing date is specified in your sales contract. Keep in mind that the transaction can close before this date if the title, escrow and loan arrangements are all in place, and if both buyer and seller agree to close earlier than originally estimated. If it appears it will not be possible to close before the agreed-to date, confer with your broker about the need to formally extend the date through additional negotiation with the seller. In any case, make sure the closing occurs before your interest rate lock expires.
Typically, you will sign all necessary documents at the offices of the title company, or at another location determined prior to the final document preparation. You can coordinate these details either directly with the escrow officer or with the assistance of your REALTOR®.
Be prepared to bring a cashier’s check to your signing appointment to pay for closing costs. A title company representative will inform you of this amount.
Prior to closing
Prior to signing final documentation, a buyer will have to acknowledge the closing disclosure which the borrower can compare to the Loan Estimate to make sure no errors or omissions exist. Once the closing disclosure is acknowledged, the buyer must wait 3 business days (includes Saturdays but not Federal holidays) to sign their final loan documents (on 3rd day). In Oregon the buyer typically needs to sign these final documents at least 24 hours in advance of the closing date. The Consumer Financial Protection Bureau offers this closing process checklist.
At your closing
Among the documents you should receive at the closing are:
- Deed of Trust – This pledges the property to the lender in case you default on the loan.
- Note – Often called the promissory note, this represents your promise to pay according to the agreed upon terms of the loan.
- Deed – This document transfers ownership from the seller to you.
After your closing is complete, keep any paperwork you received in a safe place. Remember to keep a copy of every document you signed.
When you file your taxes, it may be useful to have a copy of the settlement form because it lists items that may be tax deductible. Also make sure you keep all homeowner’s insurance and title insurance records in a secure place.
After your closing
After the closing, you own your home. So, you may begin wondering what you can do to protect your investment — and perhaps even help it increase in value.
Homeownership brings both rewards and responsibilities. It’s important to keep both your home and your finances in good shape. That means managing your money wisely to ensure you can meet your obligation to repay the mortgage loan. This will enable you to make your home’s equity work for you.
Staying current on your mortgage payments will ensure that you keep your home. Making late payments usually results in late charges, which could reflect poorly on your credit report and could impair your credit rating. Good credit is important for many reasons, especially if wish to refinance in the future.
If you consistently fail to make timely mortgage payments, you could lose your home and the good credit you’ve worked to maintain. Contact your lender immediately if you are having trouble making your payments.
You can potentially increase the value of your home by keeping up with repairs and maintaining and enhancing the condition and appearance of your home.
Call before you wire funds
In a common scam, an email account is hacked (it could be broker’s, escrow’s, or consumer’s email). The hacker monitors the account, waiting for the time when the consumer must wire funds. Broker, escrow, and consumer have no knowledge they are being monitored. The hacker, impersonating broker or escrow, instructs the consumer to wire funds immediately. The wire instructions are for an account controlled by the hacker. These instructions often create a sense of urgency and explain that the broker or escrow officer cannot be reached by phone so any follow-up must be by email. When the consumer replies to this email, their email is diverted to the hacker. The consumer wires the funds, which are then stolen by the hacker with no recourse for the consumer.
Never wire funds without first calling the known phone number for your broker or escrow and confirming the wire instructions. Do not rely upon email communications.