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What to Expect at a Mortgage Closing

Whether you are purchasing your first home or have been through the process before, it's always good to know what to expect at the mortgage closing.

You can't move into your new home until you legally close on the sale. This is the very last step in the home buying process- the time when you actually sign the mortgage papers, the seller receives the money for the property, and you go from being a "home buyer" to a "homeowner".

It's easy to get caught up in the excitement of closing on your new home! But financial experts agree that it is in your best interest to know what is going on every step of the way, to understand what you are signing, and to be aware of what to expect in closing costs. Educating yourself about the closing process can reduce the stress and anxiety that typically come with making such an enormous financial decision. Knowing what to expect on closing day and being prepared can let you concentrate on the big event- owning your new home.

What Happens at a Mortgage Closing

Depending on where you live, there are certain people generally involved in a mortgage loan closing. This includes you, the seller(s) and their attorney, your attorney if you have one, both real estate agents, a builder's representative if you are purchasing a newly constructed property, and the closing agent. Your mortgage lender may send a representative to the closing also but this is usually considered optional. Normally, a closing will take around one hour to complete but can take longer depending on the circumstances.

If you live in a state which does not require a formal closing meeting, an escrow agent, closing agent, or attorney will draw up and process all the necessary paperwork. This person will arrange for all the papers to be signed and will collect and disburse the funds.

A mortgage closing generally consists of the following:
  • Paperwork. There is a lot of paperwork involved with a mortgage closing. You should be prepared to read all of the documents thoroughly and ask any questions before signing. It's important that you understand everything as stated in your loan document. Make sure that the terms and conditions are exactly what you agreed to. Your loan documents should include a settlement statement, mortgage or deed, a Truth-in-Lending statement, and the promissory note.
  • Down payment and closing costs. Once everyone agrees that the paperwork is in order, you (the buyer) will submit the funds for the down payment and closing costs on your home. This is done with either a certified check or cashier's check. Occasionally money is drawn from an escrow account that is established for your home purchase.
  • Funds for home loan. Your mortgage lender provides a check for the mortgage amount to the closing agent.
  • Proof of insurance. You will be expected to bring proof of homeowner's insurance to the closing.
  • Signed, sealed and delivered. When the paperwork is all signed and the transfer of funds has been done, you then receive the keys to your new home.

HUD-1 Settlement Statement

One of the most important items to review and sign at the mortgage closing is the HUD-1 Settlement Statement. The U.S. Department of Housing and Urban Development (HUD) is a government agency which oversees home mortgage lending practices. This document lists the services provided and all charges to the buyer and seller.

It's very important to thoroughly read this Settlement Statement prior to closing. This document will itemize the exact amount of your closing costs. It will also specify the interest rate on your loan.

You should contact the escrow agent at least 24 hours before your closing to request a copy of the Settlement Statement. If it contains any additional clauses or stipulations than those which you agreed to or if your interest rate is different from what you expected, contact your lender and resolve these issues before the closing. Do not sign anything until you are completely satisfied with all the terms and conditions as itemized in your Settlement Statement.

Finally, do not feel pressured into signing a mortgage loan agreement. If you are unable to resolve the disputed issues with your lender and have not signed any paperwork, you have the legal right to walk away from the home purchase.