It is closing day, you’re probably excited to move into your new home. Many buyers of ours wonder about what happens on closing day. Here is an article that details important events that lead up to closing and what actually happens on closing day.
What happens on closing day for a buyer? On closing day, you will sign documents to transfer the ownership of a seller to you as the buyer, and in return, you provide the funds to the seller. The documents will include the settlement statement, initial escrow disclosure, promissory note, and the deed of trust.
Don’t just show up at the closing day table. You must come prepared so that you can be sure to close on your new home.
When you did the inspection of the home, the seller’s items were still inside a home.
But now close to closing date the seller has moved out and it might not look the same.
As the seller was moving, there may be scratches or damages.
A final walkthrough allows you to look at the home before closing to see if there are any damages after the move out.
If you ask the sellers to do repairs on the home, a walkthrough will also allow you to check for those repaired items.
You may choose to do a re-inspection, getting the inspector out there just to look at the repaired items to see if they have been done correctly.
The underwriter is the person who will look at your income, credit, assets, and debts to see if you are qualified to purchase the house and able to pay them back every month.
After reviewing your loan file, the underwriter will either respond with approved, deny, or may choose to obtain more documents for a second review.
If he/she has deemed you as a risky borrower, they will not issue the loan. Or they might choose to respond they need more documents.
This means the documents you have provided don’t match up with what you’ve told them.
I think if your are working with a great lender, they will be able to foresee what is coming and prepare you for those situations.
You might have income discrepancies or employment issues. A great lender can help by preparing you for a letter of explanation to help you towards a smoother closing.
The Closing Disclosure
After the underwriter has told your lender that your he/she has verified your loan filed and has considered you a qualified low risk borrower, your loan has been approved!
The lender prepares this document which shows the mortgage loan you have selected, loan terms, projected payments, all of the fees charged and closing costs for you to get the loan.
You have a financial entity that is looking out for your best interest when it comes to obtaining a loan.
The rule was placed to give you time to think about the terms and fees for the loan.
According to the Consumer Financial Protection Bureau CFPB, this Closing Disclosure has to be signed three days before you can sign the closing document, also known as settlement statement.
If this document doesn’t get delivered to you on time to sign, you might be out of contract between you and the seller.
We have seen situations where home buyers don’t get their documents to the lender in time and delayed their closing disclosure to be signed.
This results in extending the closing date.
It is critical for you and the lender to get all of the documents that lender requires to close on time.
You can help the lender by providing documents that they require as fast as you can. The sooner the better.
Wire has become more common over the years and some people have lost thousands because of it.
A hacker can hack the email of a broker, escrow, or consumer and impersonate a person asking the buyer to wire the funds.
The money is then lost and cannot be recollected, and the transaction cannot be closed.
The buyer doesn’t get the house and loses their down payment and closing cost money.
We just had a fraud happen and luckily the buyer confirmed it with our company so no money was transferred.
Someone called and asked our buyer to wire half of the money then they will send the loan docs.
It doesn’t happen often but when it does it can be a huge issue.
The Location of the Signing
You can either choose to sign at the escrow office, at your workplace, or even your house.
If possible, we would recommend signing at the escrow office, since the documents are there.
You don’t have to schedule a notary to come to your place and delay closing, unless the escrow office is far from where you are.
And you don’t have to fork out more money to pay for the notary service.
What to Bring to Signing?
Escrow needs to know who you are and confirm your are the buyer/buyers on the property.
So you will need to bring a valid photo ID that is current and up to date.
Escrow will also need the funds to close the transaction. They will need the wire or the check for the down payment and closing cost.
So you will have the option to bring a cashier’s check made out to the escrow company or wire the funds.
Bringing the cashier’s check is always a safe bet. As mentioned earlier about wire fraud, you might not be wiring the money to the escrow company, but a hacker.
If you do decide to wire the funds, pick up the phone and confirm it with your escrow agent before making any kind of transfer.
HUD 1 Settlement Statement
We know you have many documents to sign on closing day.
But if you’re going to skim over a document, this is the one you do not want to take lightly.
The settlement statement shows where your money is going and if it’s for the correct amount.
Some common items you might see on the settlement statement are escrow fees, loan fees, pro-ration of interests and taxes.
The lender wants to make sure they are lending money to an asset that is protected against unexpected damages so they will require you to have coverage before closing on your new house.
Most likely you will not get a formal policy. You will get what is called an insurance binder, which is a contract of a temporary insurance pending the issuance of a formal policy.
Even if temporary, the binder is a fully enforceable contract of insurance.
Documents You’ll be Signing
Promissory Note: You are signing this document agreeing to pay the bank back the total sum of money, of course with interest. The terms of the note generally include the time frame the amount due needs to be paid back as well as the loan’s interest rate, monthly payment dates, and payment methods.
Deed of Trust: Let’s hope this never happens. In this document, the document allows the lender to take the house back in the case that the borrower can’t pay back the loan or is late on their payments for a specified amount of time. The information will talk more about the responsibilities of you as a homeowner.
Initial Escrow Disclosure: By signing this document, you’re acknowledging that you understand escrow is giving any advice by law. And other parts just list what are the closing agent’s duties and the events that are handled outside of escrow and they are not responsible for.