Home Buying: Closing

This is it—closing day has arrived. Time to warm up your writing arm. “Closing” is where you will sign all of the final documents needed to complete your purchase and legally transfer the property to you.

The closing usually takes place at the office of your title or escrow company, but if needed, other accommodations may be available.  Be sure to speak with your escrow officer about any logistical needs you may have.

Who will be there?

In addition to yourself and any co-signers on the loan, you will be joined by the escrow officer and your realtor. 

What will happen?

At the close, you will sign your name again and again (and again). For many, this is the most memorable part about the process of closing on your real estate transaction.

You’ll sign a promissory note saying you’ve accepted the mortgage loan from your lender—and that you agree to pay the amount you’re borrowing, plus interest. You will also sign a document that that states you agree that your home is collateral for the loan. This will either be called a mortgage or a deed of trust, depending on the state where you are purchasing property.

Your loan will transfer the money to the seller on your behalf. The seller will sign a deed, which transfers the ownership of the property to you.

All documents will be prepared and recorded by the title company or settlement agent.

There will also be other legally binding documents for you to sign that will state the financial obligations you are taking on, as well as your rights as a property owner.

It’s important that you understand what you are signing. If not, stop and ask. If you think it would be helpful, your real estate professional can walk you through the paperwork ahead of the closing meeting.

The documents

The mortgage note

The mortgage note states that you agree to repay the mortgage loan and spells out the terms: the amount you owe, the interest rate, dates when the payments are to be made, length of time for repayment, and where the payments are to be sent. It also outlines the consequences of failing to make your monthly mortgage payments.

The mortgage or deed of trust

Signing the mortgage or the deed of trust (depending on the state in which you live), gives the lender the right to take the property by foreclosure if you fail to pay your mortgage according to the terms you’ve agreed to. It also states most of the information contained in the mortgage note.

The deed

A deed transfers ownership of the property to you. It lists the names of the previous and new owners and a legal description of the property; it is signed by the person transferring the property. It gives you title to the property, but the actual title is conveyed to a neutral third party (a trustee) until the mortgage has been paid in full. The closing agent will record this document with your county. You will receive a copy at closing and another copy after it has been recorded.

Tips

Exciting as it is, the closing meeting can be stressful due to the sheer number of documents you will need to sign. There are a few things you can do to make it more stress-free:

  • Read all documents sent to you in advance. That way, you can identify any questions you may have before the close.
  • Feel free to ask all questions you have. Nearly everyone has questions, and this is expected. More importantly, it’s your right, as the documents you are signing are binding commitments.
  • And the light at the end of the tunnel? Keys to your new home!