The mortgage closing process is something that many people dread, typically because they have no idea what to expect. How long does it take? What do you need to bring? Will anything go wrong? These are just a few of the questions that run through people’s minds. They dread the unknown, which ends up causing them unnecessary anxiety. Typically, the mortgage closing process is very simple once you make your way through the underwriting process. Here we will break down what you can expect.
Who will be There?
At the closing table, you will likely see more people than just the loan officer you have been dealing with to get the loan done. You will see not only a representative from the lender, but also a closing agent, which is usually a representative from the title company; possibly your attorney if you hired one; any real estate agents involved in the purchase/sale; and the actual seller. All of these parties play a role in the home purchase process, but the main person you will deal with is the settlement agent, otherwise known as the representative from the title company.
What will you Do?
At the closing, you will be asked to sign what seems like too many papers. The settlement agent will sit down with a hefty stack of papers that they will go through with you one by one. If you have any questions, you are free to ask them at this time. You can also consult with your attorney if something does not seem right. It is recommended that you bring your original paperwork to the closing so that you can compare all of the fees and terms to ensure that you are getting exactly what the lender promised you from the start. Comparing your Good Faith Estimate and Truth-in-Lending will help you to confirm that you are closing on the same terms that you agreed to before. You should also have your insurance and tax documents with you to ensure that your escrow accounts are calculated correctly or that any payments you are required to bring equal the amount that is owed on your insurance and/or taxes.
The Important Documents
The most important closing documents you will see at the mortgage closing include:
- Mortgage note – The mortgage note is the document that you sign that tells the lender that you promise to repay the amount you are borrowing. This document is what states the amount you borrowed and at what terms. It is also what states what the lender will do against your property should you default on your loan.
- Mortgage Deed – The deed is what gives the lender the actual right against your property. It is the piece of paper that gets recorded with the county and the document that can become a lien on your property should you default on your loan.
- Closing Disclosure – This document details every aspect of your loan. It has not only the terms but also the interest rate and the amount of the monthly payments. It will also show you all of the closing costs. By law, you have the right to this document 3 days prior to the closing since there is so much to review, as this gives you enough time to digest everything and make any necessary changes.
Pay any Costs during the Mortgage Closing Process
Not every loan requires the borrower to pay money at the closing, but many do. If you are required to bring money to the closing, you will need to bring a cashier’s check to ensure that the funds are available. The settlement agent will let you know a few days before the closing exactly how much you need to bring to the closing. The most common reasons to bring money to the table include:
- Down payment
- Closing costs
- Upfront mortgage insurance (FHA loans)
- Funding fee (VA loans)
- Real estate taxes
- Homeowner’s insurance
Any or all of these fees might be required at the closing. Going over how much you are going to bring to the closing ahead of time can help to reduce any last minute stress at the closing. In addition, the lender will need to verify and source any funds you bring to the closing to ensure that they are your funds.
Money Exchanging Hands
At the closing is when all money exchanges hands. This is when the lender disburses funds to the appropriate parties including:
- Title company
- County for real estate taxes
- Insurance company for homeowner’s insurance
- Any liens that must be paid before the loan gets disbursed
- Any other interested parties
The money is in certified funds and all parties receive their checks at the table.
The closing process is a simple, everyday process that you can easily get through as long as you know what to expect. Talk to your lender before going to the closing so that there are no unpleasant surprises at the table and the entire process can go smoothly.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.