Understanding the Mortgage Closing Process

by Utah Loan Pros on October 9, 2012

What is involved in Closing on a home?

Most home buyers who are closing their home ownership deal tend to neglect the importance of property closing. The mortgage closing costs are an integral part of the home mortgage loans. Lenders do incur some expenses in the process of developing a Utah Mortgage loan for you, their time spent is not free, and therefore somebody (usually the borrower) needs to pay for their time. A home’s closing process is as important as making a deal in the early phases of the process. However, as a borrower, you should not overpay these costs. Many lenders try to inflate these expenses.

This article will equip you with some basic knowledge so that you understand how to check these expenses and not overcharged by lenders. In every real estate buying, the ending process serves as closure for both the buyer and seller or the buyer and the agent. Some home owners are quite confused as to what takes place during the closing phase. So, here is a clue, closing it is easy and hassle-free given that you truthfully understand what goes in it. When you sat closing procedure, it means that it is the end of development. This is where transfer of home ownership rights and other housing related issues take place. Most often, what makes the whole situation confusing that lives home owners in puzzle are the terms and conditions enclosed in the contract as well as the miscellaneous fees involved.

Mortgage Closing Process

Closing Process

At the end of a mortgage loan process that takes weeks and sometimes months, all the pieces come together at a “closing”. The major objective of a closing is to sign contracts and disburse the loan funds. In the real estate world, Closing costs are the expenses you pay that cover the costs of finalizing your mortgage loan. Closing costs vary widely from one mortgage lender to the next and many lenders try and inflate these expenses. You can reasonably expect to pay as much as 3% of your loan amount in closing costs. Also, this takes place once you get an initial financing go signal from your mortgage lender or Mortgage Company given that the seller approves of it. During this stage, a mortgage is usually given by the borrower to the lender in order to have a legal documentation that is more known as Deed of Trust.

Elements Under Home Settlement Process

During this time, there are several actions that must be done whether both the buyer and seller agrees of it before the last phase (closing) occurs. A document package is a set of documents applicable to an individual transaction. Document packages differ for conforming, non-conforming, FHA and VA loans. Different types of Utah Mortgage require different documents, and the same is true of different types of property. Individual states have their own document requirements, and the same is true of many individual lenders. This means that the number of different document packages number in the millions.

  1. Good Faith — The Good Faith Statements provide critical information for you to do comparisons with other lenders and get the best deal for yourself. If there is a fee that you don’t understand, ask your lender to explain. Make sure the origination fee is not more than 1.5% of the total loan amount and the loan- processing fee should not be more than $400. If these fees are higher than those numbers, check if your lender can reduce them. If they can’t reduce these fees, then we advise you to look for other mortgage company that can provide you lower mortgage closing costs.
  2. Getting it appraised — a home appraisal takes place through the help of a certified home appraiser in order to validate the home value of the house, whether it is priced below or above its actual selling price or if it is just sold in amount that is exact its purchase amount.
  3. Conduct a home inspection — doing inspections of a house these days is a prerequisite not just by the buyers but the real estate agents as well to which a professional home inspector performs a detailed investigation in every area of the house and then makes a report about his findings which entails for example, the home’s problem areas (e.g. leaking pipes or broken panels), molds, defects and the like to ensure that the property is in a stable condition.
  4. Insurance — both title and home insurance are required by mortgage companies nowadays to prevent any misunderstandings along the way that also serves as both buyer and seller’s security from ownership claims and other property damages that may take place in the coming years.
  5. Title Examination — this is vital as secure the buyer from purchasing a house that is not a legal property of the seller that works by letting the title company do research whether or not the home seller has an official right to move tenure of the house and if the house has existing mortgages.

Fees

There are certain expenses that must be taken card of before the whole home buying procedure ends. That means that you need to settle any escrow costs, interest rates, Utah Mortgage Loans, settlement fees and other closing related expenses.

The fees are either non-recurring or recurring fees. Non-recurring fees are onetime expenses you pay like the origination fee or discount points. Other non-recurring fees include the title search, survey, appraisal fee, and the cost of credit reports. Recurring fees and those you pay at closing and every year after that. These fees include mortgage interest, taxes, and insurance. To avoid overpaying these different closing costs it is important to carefully review the Good Faith Statements to find out what is being charged and who the fee is paid to.

Closing Agent

You are obligatory to hire a closing agent. These agents are specialists on this field so they know what steps are needed to make the title transfer a success. The best possible scenario is for the opposing party to your side to pay for the title policy and its associated fees. This simply means that if you are buying a property, the seller pays. If you are selling a property, the buyer pays. This choice is legal in every state if the contract so reads and you can make the contract read the way you want, if the opposite party agrees. You get to walk through the whole process stress-free since you are assisted by an expert.

Day Before Closing

You and the seller are given 24 hours to ensure that all legal documents are ready and valid and that the seller has evacuated the house. One day before the closing process ensues, make sure that you have the following on hand and ready:

  • Contract — The mortgage contract provides entry into real estate for most buyers, and protects the interests of lenders and borrowers. Terms of the negotiations relate to real estate collateral, alongside interest rate charges that compensate banks for making loans.
  • Confirmation of title — Confirmation from a mortgage company will come after you have been approved for the mortgage loan. This will include some vital information about the mortgage, will give you the basic details, and will have a place for you to sign.
  • Home insurance — Mortgage insurance can refer to two types of insurance. Life insurance policy is if you are permanently disabled or die, this insurance policy kicks in to completely pay your mortgage, thus leaving you or survivors without the obligation of paying for a mortgage. Private mortgage insurance (PMI) or lender’s mortgage insurance (LMI). Both PMI and LMI and usually non voluntary insurance fees are tacked onto the purchase of a home if you take out a jumbo loan or if you cannot place at least 20% down when you purchase a home.
  • Mortgage indemnity — Mortgage indemnity policies are intended to benefit the lender in case of one’s inability to pay mortgage payments. They offer compensation to the lender if the property has to be sold or foreclosed.
  • Home inspection and appraisal reports — The appraiser’s report will evaluate the property in terms of its replacement cost, marketability and physical condition to guarantee that, in the case that it has to be foreclosed, the lender may re-sell it quickly with minimal loss. An inspection is a complete survey of the home’s physical condition done in order to determine the home’s real condition.

On the day of settlement, both parties are going to sign the closing documents that will serve as proof that both you and the seller agree to the terms and condition stated as well as consent full transfer of ownership rights to you for your Utah Mortgage.

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: