[MUSIC PLAYING] [Words appear: Making Cents, Closing Day]
Buying your dream home might start at an open house. But no matter where it begins, it becomes official on closing day. Closing day is when your down payment and many fees you’re required to pay will be collected. It’s when you’ll verify that all the terms of your agreements have been met, and finally, when you’ll sign the necessary documents. Here’s who you’ll work with to get you ready for closing.
Inspectors. Home inspection requirements vary based on the location of the home. A licensed home inspector will inspect the condition of the house you plan to buy. This should occur as early as possible, so you can address any issues.
Appraiser. Before extending financing, your lender will need to verify that the property is worth at least as much as the sales price. Once a contract is signed, the lender will have a real estate appraiser assess the property’s value and fill out a report.
Insurance companies. Your lender will require proof you have homeowner’s insurance. They’ll also let you know what level of coverage is required, so you can shop around for the best option. It’s your responsibility to secure all insurance policies at least one week before closing.
The settlement agent and title company. These independent agents make sure the terms of the sales agreement are met, and the right paperwork is filed. A title company representative conducts the background investigation, known as a title search, to ensure the person selling the home has a clear title to the property.
[Words appear: Tip. Credit unions typically charge lower fees than other mortgage lenders – meaning less owed at closing.]
Now, when it comes to closing day, you’ll owe your down payment as well as closing costs. On average, the fees involved in closing will total about 3% of the loan amount. This amount may vary, however, based on your home’s location, cost, and other factors. Your lender will provide you with a closing disclosure form listing your final closing costs three days before closing. Here’s a description of some of the fees included in your closing costs.
Origination. This fee is paid to your lender for processing your loan application. The fee is stated in points, or a percentage of the mortgage amount. 1 point is equal to 1%. So if you owe 1 point on a $100,000 mortgage, the fee will be $1,000.
Title. The title is a legal document that grants ownership and confirms that the title is free and clear for sale. You’ll also need title insurance, which protects you and your lender against future ownership claims. When the title passes from one owner to another, state or local tax is usually charged.
Survey. Lenders sometimes require a drawing, also known as a survey, showing the legal boundaries of the property.
Throughout the process, be sure to ask your realtor and your lender questions. By resolving details early on, you’ll be more likely to enjoy a smooth closing. And that’s the key to making your dream house your dream home.
[Words appear: Logo, Navy Federal Credit Union. Member NCUA. Equal Housing Lender.]