How To Prepare for Closing

Closing or settlement (also called close of escrow in some states), is a process that involves a lot of paper and a lot of money. When it all stops sliding back and forth across the table, you own your new home. Congratulations!

Celebration aside for the moment, at closing the ultimate purpose of the original sales agreement is achieved: Ownership of your new home is transferred from the builder to you. The technical steps include finalizing your loan (one set of papers and checks) and the builder selling you the home (another set of papers and checks).

Next the money is disbursed to the appropriate people and companies including real estate agents, attorneys, title company, and surveyor, just to list a few. Title is transferred and the loan is recorded against your new property.

This process sounds easy enough, but it involves about 75 documents. Some of the documents are duplicates, but you need to sign nearly all of them.

Depending on how many questions you have, closing should take from 45 to 90 minutes. Tounderstand how this closing is achieved, let’s review the process one step at a time.

  • Closing Appointment

    Expect several days notice for the closing appointment. Whoever sets the time should confirm the location with you. Closings can take place at a title company, the lender’s attorney’s or real estate agent’s office.

  • Closing Documents

    At closing, you sign and receive the documents necessary to convey the new home to you and to close the loan from the mortgage company. The standard documents include the following:

    • Deed: The deed conveys the home and lot to you, subject only to permitted exceptions such as a recorded easement.
    • Promissory Note: This note is from you, payable to the lender in the principal amount of the loan plus interest.
    • Mortgage of Deed of Trust: This document encumbers your home as security for repayment of the promissory note.
    • Title Insurance Commitment: The title insurance company will mail the actual policy several weeks following the closing. When you receive this policy, keep it in a safe place with your other important papers. What you receive at closing is apromise that the insurance company will issue the policy.
    • Builder’s Limited Warranty or Insurance-Backed Limited Warranty: Unless you move into your home early under a rental agreement with your builder, the limited warranty begins as of the date of closing.
    • Homeowner Association Documents: If your new home is in a covenantprotected community, you will also see homeowners association covenants, conditions, and restrictions, the association bylaws, and articles of incorporation at closing. In addition to these standard items, the lender title company or the builder may ask you to sign other documents.
  • Closing Expenses

    The closing agent itemizes the charges and credits for closing on a standardized form called a Settlement Statement. The form lists standard items and has blank lines for additional entries specific to your purchase. Not every line applies to every closing.

    If you already owned your lot, the process for closing is simpler. You signed much of the paperwork described here when you closed on your lot purchase. Similarly, some custom home construction loans, which go by names such as onetime close, combination loan, or express loan, convert to a permanent mortgage without a second closing.

    Although closings vary from region to region and with the type of financing, ultimately the goal is the same: the transfer of ownership of your new home from the builder to you. Ultimately, you have house keys, and the time has come to move in and begin to enjoy your new home.

  • Preparation

    To take full advantage of your orientation, consider these hints.

    • If you visit your home a day or two prior to orientation, you may notice dozens of details that need attention. Lastminute rush is common. The fine tuning that polishes a home for delivery cannot be done until final installations are complete.
    • If you haven’t already done so, read the builder’s limited warranty, warranty standards, and literature you have received about home maintenance.
    • Review the forms the builder uses for the orientation. Builders who provide a homeowner manual usually include copies in it for you to preview.
    • Bring your contract, selection sheets, and change orders.
    • If you have questions, write them down, room by room, so you can bring them up when you get to that part of your home.
    • Orientations are most beneficial if you can focus on your home and the information your builder presents. Arrange for friends and young children to see the home at a time before or after the orientation
    • Wear shoes that are convenient to get off and on and comfortable clothing.
    • Arrive for your orientation rested and alert.
    • Plan to listen carefully and take a handson approach. Push buttons, lock locks, and flip breakers. This action helps you remember the dozens of details your builder covers.
  • Settlement Agent

    Depending on where you are building, your lender, a title company, an attorney, a real estate broker, or an escrow company can serve as the settlement agent and orchestrate the closing. Services provided by the settlement agent include ordering the title work and property survey and organizing all the paperwork for the closing itself. Chances are either your builder or your lender has experience with closing agents in the area and will suggest a closing agent. If the choice is left to you, compare the services provided and fees charged before making a final choice.

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