Closing on Your House
With the inspection behind you, the next step is to lock in the terms of your mortgage. Most banks are willing to lock in an interest rate for 60 days. Another important step is for your real estate agent or real estate attorney to conduct a title search to ensure that no one else claims ownership of the title or holds any liens against it. Examples of liens are a second mortgage on the home or a tax lien from unpaid property taxes.
If everything is clear, then you are ready for the closing, one of the most significant days of your financial life. At the closing, you and the sellers -- along with your real estate agents -- will meet in a conference room to sign the largest stack of papers you've ever seen. When you leave, you will have a mortgage, a title, and the keys to your new home.
For a smooth closing, come prepared. First, you will need to gather the following documents:
- Proof of homeowner's insurance: A letter proving that you have secured homeowner's insurance for the property
- Down payment on the mortgage: Your lender will require a certified check for the full amount of the down payment, usually 20 percent of the sale price
- Closing costs: Another certified check to cover miscellaneous closing costs, which your agent will negotiate with the sellers
The closing itself will be run by a closing agent, a neutral third party in the purchase. His or her job is to ensure that you understand each form you are signing, and there are many of them. Here are some of the most important for the buyer:
- Mortgage note: After reviewing and signing a truth in lending statement, you will officially sign on to the mortgage, agreeing to foreclosure if you fail to make timely payments
- Settlement statement: Also known as HUD Form 1, this document explains all of the settlement costs and who is responsible for them
- Warranty deed: This is the document that officially transfers the title from seller to buyer
Expect to spend at least an hour or more at your closing. Make sure you have your lawyer present to double-check all your documents. If you have small children, get a babysitter. All of your attention needs to be focused on listening to the closing agent and double-checking the documents. Incredibly, after the last document and check is signed, the closing agent will hand you a set of keys to your new home. Congratulations! Now you can start worrying about the move.
For lots more information about mortgages, real estate agents and home buying tips, explore the links below.
Author's Note: How Buying a House Works
After a decade and a half of renting crummy apartments and moving every two years, my wife and I decided to buy our first house in the summer of 2011. Thanks to the real estate collapse, prices had bottomed out and interest rates were at historic lows. Still, we wanted to make sure we didn't end up like the millions of Americans who were swept up in the housing boom and now faced foreclosure. The fear of a bad mortgage forced us to sit down and draw up our first 100 percent honest and realistic family budget. It was a humbling experience, but it enabled us to house hunt with confidence, knowing that we could actually afford these bedrooms and basements and backyards. After a whirlwind of forms and signatures and very large checks, we had a house. Even better, we had a home.
- Jacobe, Dennis. Gallup. "U.S. Homeownership Hits Decade Low." April 26, 2012 (Accessed Sept. 14, 2012) http://www.gallup.com/poll/154124/u.s.-homeownership-hits-decade-low.aspx
- RealtyTrac. "National Real Estate Trends" (Accessed Sept. 14, 2012) http://www.realtytrac.com/trendcenter/trend.html