Real Estate & Construction Law
— Closing —
What is included in the closing costs?
There may be closing costs that are customary or unique to a certain locality, but closing costs are usually made up of the following:
- Attorney’s or escrow fees (yours and your lender’s if applicable);
- Property taxes (to cover tax period to date);
- Interest (paid from date of closing to 30 days before first monthly payment);
- Loan Origination fee (covers lenders administrative cost);
- Recording fees;
- Survey fee;
- First premium of mortgage Insurance (if applicable);
- Title Insurance (yours and lender’s);
- Loan discount points;
- First payment to escrow account for future real estate taxes and insurance;
- Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable); and
- Any documentation preparation fees.
What is a good faith estimate and how does it help me?
A good faith estimate lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. The lender must supply the estimate within three days of your application so that you can make accurate judgments when shopping for a loan.
What is RESPA?
RESPA stands for Real Estate Settlement Procedures Act. This Act requires lenders to disclose information to potential customers throughout the mortgage process, By doing so; it protects borrowers from abuses by lending institutions. RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction.
What do I get at closing?
- Settlement Statement
- Truth-in-Lending Statement
- Mortgage Note
- Mortgage or Deed of Trust
- Binding Sales Contract (prepared by the seller; your lawyer should review it)
- Keys to your new home
What can I expect to happen on the closing day?
You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.
Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You’ll pay the lender’s agent all closing costs and the agent will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.