What is a Real Estate Closing?
A real estate closing is the day you finally get the keys to your new place. The end of the process of buying a home or other property, it is the final transfer of keys and money. This can be a confusing process for both buyers and sellers, especially if you’re a first-time buyer. Depending on the circumstances, there may be dozens of different forms needed during the closing, whether you’re buying the property outright or getting a mortgage to cover the costs.
If you’re taking out a mortgage, this will add several documents to the closing process. The first is the Truth in Lending statement, which outlines the interest rate, APR, and amount financed, and will also tell you the total cost over the lifetime of the loan. A similar document known as the monthly payment letter breaks down your monthly payment into the amounts paid towards the principal, interest, taxes, insurance, and other costs. The Real Estate Settlement Act, also known as the HUD-1 statement or Uniform Settlement Statement, is a required document that discloses all settlement costs.
In addition to these informational documents, there are several important forms to sign in order to receive the loan. The Note is the document that you sign agreeing to the loan and guaranteeing that you’ll pay back the amount borrowed. The document actually known as the mortgage puts a lien on the house as security for the loan, allowing the bank to foreclose if you don’t pay the loan.
Home Transfer Documents
Whether you are taking out a loan in order to purchase real estate or are paying for it outright, there are several documents needed to transfer ownership of the property. First is the deed, which is the document that transfers ownership of real estate. It contains the legal description of the property, along with buyers’ and sellers’ names. A ‘warranty deed,’ the most common type, is a deed containing the seller’s guarantee that he has the right to sell the property. The title is the official document that says who owns the property. There are a number of other documents that you will receive during the real estate closing, such as:
- Title insurance. This policy is issued after a search through the public records that may affect the seller’s ability to transfer the real estate
- Tax and utility receipts.
- Proration agreement. This document outlines who will pay the costs (such as utilities or homeowner’s association dues) for the month of the sale. Often, one party pays these costs, and the other party reimburses them for the amount of time that the home was in their name during that month.
- Certificate of Occupancy. This certifies that the building inspector has found the building to comply with all zoning regulations and building codes
- Name affidavit, a legal document saying that you are who you say you are.
- Acknowledgment of reports. This document assures that the buyer has seen all reports related to the property, such as surveys and a termite inspection. These reports may themselves also be included in the closing paperwork.
- Miscellaneous documents can include a flood insurance policy, hazard insurance policy, homeowner’s insurance proof (known as a ‘binder’), septic letter, well letter, and homebuyer’s warranty, among other documents depending on the circumstances of the sale.
What else will I need?
Don’t forget to bring money (in the form of a cashier’s check) to pay for any closing costs you are responsible for, along with photo ID. Finally, don’t forget to exchange all keys once you’ve signed the necessary documents at the closing.