At settlement, also referred to as
closing, your weeks of planning and anxiety finally pay off. In a few circumstances, an
escrow agent prepares the documents and then collects and pays out the various funds. More
often, all parties to the transaction, including the lender; buyer, seller, and their
attorneys; real estate agents; and someone from the title company will meet with the
closing agent to settle the paperwork and exchange moneys associated with the deal. If
your loan application process went smoothly there should be no surprises at settlement.
However, last minute problems may arise. For example, a termite inspection report may be
missing or the loan applicant may have forgotten to bring a one-year paid homeowner's
insurance policy. Depending on the parties involved, these instances may postpone
settlement.
You will be presented with a settlement or closing costs sheet that reflects all the
applicable details of the transaction. The settlement sheet details the amount of money
due to and from various parties. Review this document carefully. If you were fully
disclosed by your lender before settlement (as required by law) there should not be any
charges you do not recognize. You might want to bring along a calculator and add up these
charges. Although they are totaled on the settlement sheet, errors may occur. Closing
costs typically include:
- Loan origination fee, usually 1 % of your mortgage amount
- Discount point (or points); each point is 1% of your mortgage amount
- Assumption fee if you assume the seller's loan
- Cost of title search
- Lender's title insurance fee
- Owner's title insurance fee (optional but advisable)
- Survey fee (if applicable)
- Transfer tax (state and / or local tax and tax stamps in some areas; sometimes split
with seller)
- Lender's appraisal fee
- Recording fees for settlement documents
- Prepaid interest on your mortgage, covering the time between settlement and your first
monthly payment
- Prepaid mortgage insurance premium
- Homeowner's hazard insurance premium
- Property tax escrow Lawyer's or escrow company's fee
Your lawyer or representative will review the documents, explain them to you, and
protect your interests. You will pay your portion of the closing costs to cover the down
payment, loan origination fee (sometimes called points), an escrow amount to pay your
property taxes and mortgage and property insurance, services such as a title examination,
and document recording, among other things. You'll sign numerous documents and receive
copies of them all. You will then receive the keys to your new home!
