As a first-time homebuyer, you may be wondering what you can expect at your loan closing. You’re probably feeling all the feelings — excitement, happiness, exuberance — but the practical side of you wants to be prepared for every possible scenario. You’re in luck: This article spells out everything you’ll encounter at your loan closing so you know just what to expect.
It’s the final step in the process of buying and financing a home. It’s also called the “settlement.” This is when you and all the other parties in the loan transaction sign legal documents and distribute funds, after which you become responsible for the loan.
When you purchase a home with a mortgage loan, you typically close your loan (meaning funds are distributed) and close your home purchase (meaning you are now the owner) at the same time. Here’s what you’ll need to bring to your loan closing:
You’ve probably realized by now that there are lots of people involved in your home purchase and financing. Your closing could include the following parties:
Typically, everyone sits around a table and signs all the documents at once (there are a lot of them), although there’s no such thing as a “standard” closing procedure followed in all areas of the country.
You bet. Why is actually reading the documents so important? Well, you probably shouldn’t sign them if you notice errors or don’t understand the loan terms, or the loan amount is different from what you expected. Better to be safe than sorry — taking responsibility for a mortgage loan is a real commitment, and it will have a serious financial impact on your life. Don’t hesitate to ask questions.
You’ll also want to be sure you understand how your payments could change over time, for example, if you’re taking out an adjustable-rate mortgage. Even with a fixed-rate mortgage, your total monthly payment could change over time due to fluctuations in taxes or insurance.
Did I mention you’ll receive a lot of documents to sign? A lot. Some of these documents are:
Proof of insurance
You’ll show proof of homeowners insurance and go over any applicable tax items. You need to prove you have insurance so the lender will actually fund the loan.
Transfer of funds
This is when you pay your down payment and any closing costs to the closing or settlement agent with a certified or cashier’s check.
Transfer of ownership
After you sign all the documents and pay your closing costs and down payment, the closing is finished. Your possession date (the day you can move into your new home) is stated in the purchase agreement. If your possession date is the same day as your closing, you’ll finally receive the keys to your new home!
And even if everything doesn’t go according to plan, don’t panic. At my first loan closing, the fax machine broke (along with my heart) and the loan officer couldn’t send our lender some final documents to approve. It was almost 5 p.m., and the lender’s office was about to close. I had just started frantically dialing my parents’ phone number to see if they would welcome houseguests when the machine whirred to life at the very last minute (4:57 p.m., to be exact). All I can say is, the universe (and apparently, its fax machine) works in mysterious ways.
If you’d like even more detailed information about what you can expect at your loan closing, check out the Consumer Financial Protection Board’s in-depth checklist or visit consumerfinance.gov.