CLOSING ON YOUR HOME

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1 WHAT YOU CAN EXPECT WHEN CLOSING ON YOUR HOME

2 WHAT YOU AS A HOMEOWNER CAN EXPECT AT CLOSING You have invested a lot of energy into finding your dream home. You have your financing, the neighborhood is ideal, and the house is spacious enough for your family to expand or for entertaining your friends. Now it is time to buy the property and sign the necessary paperwork. This final step in buying a home is the closing. WHAT IS A CLOSING? When you close on a home, you are officially making the home yours. Closing on a home, also called a settlement, is the process of completing a real estate transaction in which deeds, mortgages, and other required documents are signed and delivered. An accounting between the parties is made, money is disbursed, and record documents are filed. There are other details such as payment of outstanding liens and payment of property taxes that are also handled at the closing. This process usually takes about an hour to complete. When you close on a home, you are officially making the home yours. 1

3 WHO WILL BE PRESENT AT YOUR CLOSING? Typically, the real estate agent or a representative of the title company will set up the meeting to finalize everything between the buyer, the seller and the mortgage lender. The seller will transfer ownership of the property to the buyer (you), and you will finalize your loan with the lender. When you attend the closing, you will most likely be meeting with your real estate agent, the title company s representative, and possibly your loan officer. The actual person handling the closing is usually a closing agent from the title company, and he or she will conduct the meeting. The actual person handling the closing is usually a closing agent 2

4 HOW YOU CAN PREPARE FOR YOUR HOME CLOSING Before you go into this meeting, be sure you ask your lender what documents you will be expected to sign, what is included in the documents, what costs are involved, and to what you will be agreeing. There is a lot of information to absorb, so it is helpful to become familiar with the documents before the closing. Some of the most important documents you will be signing include: Settlement Statement Truth-in-Lending Statement Promissory Note Mortgage or Deed of Trust You will receive copies of all these documents. The settlement statement, known as a HUD-1, itemizes all of the final closing costs associated with the transaction. There are many documents for you to review and sign at the closing. You may be required to bring additional funds for closing costs, a down payment or proof of homeowners insurance. If you need to pay additional funds, you will need good funds in the form of a certified or cashier s check, usually payable to the title company handling the closing (a personal check will not suffice). It is a good idea to ensure any money used for closing is available two days prior to the meeting so a cashier s check can be issued by your bank. You will also be required to bring a photo I.D. to the closing. 3

5 YOUR CLOSING COSTS AND FEES These fees cover various costs associated with the handling of the full real estate transaction. Common costs include fees for the title search, title examination, and final title insurance policy. Charges for conducting the closing/settlement/escrow will also be included. You have the right to select the company you want to conduct your closing/settlement/escrow. This decision is entirely yours. More specifically, the costs may include: Settlement/Closing Fee This fee is paid to a settlement agent who has prepared the documents, calculated figures, and will oversee proper execution of the closing documents. This fee is often split between buyer and seller, but can be negotiated as part of the sales contract. Abstract of Title, Title Search, Title Examination, Title Insurance Commitment or Binder In order to ensure that there are no defects with the title to the property you are purchasing, a licensed title insurance agent will have a title search performed and will examine the documents filed of record that relate to the property. The title agent typically issues a title commitment, which sets forth the requirements that need to be completed in order to issue a final title insurance policy. The commitment will also typically list certain exceptions that are not covered by the title insurance policy. In some places, these charges will be itemized separately on the HUD-1 and in other places they may be bundled in the title insurance premium. Additionally, when a mortgage loan is involved, there may be additional charges for special endorsements and for a lender s title insurance policy. Document Preparation Some settlement agents charge for the cost of preparing legal papers such as the mortgage, deeds and any other loan or title documentation. If a lender charges a document preparation fee, it will typically appear in the Loan Fees/Direct Loan Costs section of the HUD-1. Notary Fee Since legal documents are involved, a licensed notary is required to acknowledge that the proper people signed the documents in their presence. Notaries often charge a small fee for their services. Title Insurance Premium The title insurance premium is the charge by the title insurance underwriter on whose behalf the title agency is acting, similar to the charge your auto insurance agency collects for the auto insurer. Title insurance rates are not regulated in Arkansas and title agencies often hide other fees in the premium. Be sure and ask exactly what fees the premium covers. 4

6 YOUR S TO CLOSING A HOME 1 Some information about the costs associated with closing on your home should be provided to you before you put a contract on a house. If you are obtaining a loan to purchase the property, your lender has three days from when you submit the loan application to provide you with a Good Faith Estimate of your loan costs so there are no surprises. This includes the lender s charges, as well as fees third-party providers such as attorneys, surveyors, and title insurers may charge. 2 Once the seller accepts your sales contract, the countdown to closing begins. Timing is essential to make sure all the ingredients for a successful closing are in place. You can select a settlement agent to prepare the documents for your closing or you can rely on a recommendation from your real estate agent or lender. 3 When you have selected your settlement agent, he or she will handle the closing process from there. If you have given the seller an earnest money deposit, the escrow agent, settlement agent, or real estate broker (this varies based on where you live) will see that it is promptly deposited into an escrow account where the funds are held until the time of closing. Earnest money is a small portion of the purchase price made by a buyer as a sign of commitment to fulfill the contract. 4 5 Next, the settlement agent will request preliminary title work. A title professional will search and examine the public records for information related to your home s title. This provides warnings of title defects that must be dealt with before the property can be conveyed with a clear title. For instance, the previous owner may have failed to pay local or state real estate property taxes. Or there may be an outstanding mortgage or judgment on the property. Title professionals work hard to see that such obligations are handled and to resolve any issues they find, well before you go to closing. If the sales contract calls for a prior mortgage to be paid off, the settlement agent will order payoff figures from the existing lender. If the buyer is assuming the loan, the settlement agent handles that as well. The settlement agent, if directed to do so, may also order property inspections and termite reports. If it is customary in your area, the settlement agent may order a survey. Finally the settlement agent is ready to prepare the HUD-1 Settlement Statement. On closing day, the property will be transferred from the seller to the buyer. You are now the owner of your new home! You should be aware that the behind-the-scenes process continues after the closing. The settlement agent must still forward payment to any prior mortgage holder, pay all the other parties who performed services in connection with your closing, pay out any net funds to the seller, and order a final search of the title to your new home before finally recording all the documents legally needed to complete your purchase. But you don t have to be involved in any of this. Your settlement agent takes care of these post-closing details. After the meeting, you will then be given the keys to your new home and the only thing left to do is move in. 5

7 WHY IS TITLE INSURANCE IMPORTANT? Title insurance protects you from title defects that could potentially keep you from your dream home. Problems with the title can also limit your use and enjoyment of the property, as well as cause financial loss. Title insurance reimburses and provides legal representation to real estate owners and lenders against any financial loss that might occur because of undiscovered liens, impediments or defects in the title of the property. These defects can result in partial losses or complete losses, where a defective foreclosure or forgery means legal title is not actually conveyed. There are two general types of title insurance: The Lender s policy (also called loan policy) protects the mortgage lender s interests in the property should a problem with the title arise. The Owner s policy, usually based on the home s total purchase price, protects the home buyer s interests in the property should a problem with the title arise. The Owner s policy will provide protection against ownership challenges, errors or omissions in deeds, mistakes in examining records, missed liens, and forgery, among other things. Title insurance protects you from title defects that could potentially keep you from your dream home. 6

8 ALWAYS RESEARCH, RESEARCH, RESEARCH Buying a home is one of the most important financial investments you will ever make. The important lesson to learn is the more knowledge you have about the closing documents and what to expect, the more confidence you will have going into the process. There is a lot of paperwork to sign, so make sure to look over the documents before the closing. When it comes to selecting a title service or settlement company to handle your closing, whom you select is entirely up to you. HOW CAPSTONE PIONEER CAN HELP YOU Capstone Pioneer is the only true statewide settlement service company in Arkansas, serving clients from Blytheville to Bentonville and DeQueen to Dumas. We provide faster turnarounds than other title companies. With Capstone Pioneer, you get efficient service that you can depend on knowing your transaction is completed accurately, so you can get on with moving into your new home. The Capstone Pioneer team includes not only veterans of the title insurance and settlement services industry, but also a former bank president, a former bank auditor, a former mortgage originator, a timberland owner and manager, and three lawyers. With a dedicated full-time staff of title and settlement professionals, our team has proven invaluable to mortgage lenders and real estate professionals throughout Arkansas. 7

9 CONTACT US If you have any questions about closing, or would like to talk to us about our closing or settlement services, please call at , or Find us online at Capstone Pioneer Settlement Services 501 Main Street Arkadelphia, AR 71923