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How to Close on Your Mortgage

You'll sign papers that make you responsible for the mortgage loan and monthly payment.  If buying, you'll also get title to the property.

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Make Sure Everything is in Order

Check the Figures, Get the Check, and Inspect if You're Buying

  • You will get a HUD Form 1 Disclosure/Settlement Statement that lists all settlement costs.  Compare this with the Good Faith Estimate you received when you applied for the mortgage.  Ask questions about differences or fees you don’t understand.  For more, see the Federal Reserve’s Consumer’s Guide to Settlement Costs.
  • You should be told the amount you need to bring to the closing.  If you don’t know, call and ask before the closing date.  You’ll need to bring a certified bank check for the correct amount.
  • Most home sale contracts entitle you to a walk-through inspection of the property 24 hours before closing.
    • If there are any major problems, or the property is not in the condition specified in the sales contract, you can ask to delay the closing until the issue is fixed.  You could also ask that the seller deposit money into an escrow account to cover any necessary repairs.

No Surprises

Who Might Be There & What You Might Sign

Closings vary from state to state, and even from county to county. In general however,

Who might be there:

  • Closing agent: conducts the closing and makes sure everything gets signed. This person might work for the lender or title company.
  • Lender: also known as the mortgagee, represented by a “lender’s agent.”
  • Attorneys: The closing agent and lender’s agent are often an attorneys. You could also have an attorney present to represent you and only you.
  • Title company: provides written evidence of the ownership of the property, represented by an agent.
  • The seller and real estate agents, if you are buying a property.

Key mortgage documents you will read and sign:

  • HUD Form 1 Disclosure/Settlement Statement: lists all settlement costs. The closing agent will go over this document.
  • The Mortgage: puts a lien on the house as security for the loan — allowing the bank to foreclose if you default.
  • Truth-In Lending Statement: shows the interest rate, annual percentage rate, amount financed, and the total cost — interest plus principle — over the life of the loan. Check that it’s what you expect before signing.
  • Monthly Payment Letter: breaks your monthly payment into principal, interest, taxes, insurance and any other monthly escrows. Check that it’s what you expect.

Key Real Estate Documents You Will Read and Sign, if Buying a Property:

  • The Deed: names the buyer, the seller, and a description of the property.  When signed by the seller and buyer, this document transfers title of property.
  • Proration Agreement: how you and the seller divide certain costs. For example, if the seller has the property taxes for the current quarter, you need to reimburse the seller for the time after you take title.
  • Search or Abstract of Title, and Title Insurance: The abstract gives a listing of every document that has been recorded about this particular piece of property.  It gives you the history of the house.  Title Insurance assures the lender – and you if you buy title insurance – that the seller owns the property “free and clear.”

If Something Isn't Right

Proceed With Caution

Taking on a mortgage is a major decision.  So if something isn’t right or is worrying you

  • Ask to delay the closing to set things right.
  • You could also consider backing out, though this could involve losing a deposit.
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