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Unveiling the Mysteries of a Real Estate Closing

By Eleanor Boschert

Barring any unforeseen changes, a closing can take anywhere from one to three hours. Part of your home buying team will be there, including your real estate attorney and agent. The seller and their team will be there. There could also be a closing agent working for the lender or title company. You can hold the closing at any location and will need to bring: a government issued ID; proof of homeowner insurance; certified or cashier's check; good faith estimate; HUD-1 Settlement Statement; any other documentation; and, your checkbook.

You will be signing what seems like a truckload of paper. The documents will be divided into two main categories:

  1. Mortgage Loan Agreement (You and the lender)
  2. Real Estate or Home Purchase Agreement (You and the seller)

The Mortgage Part

The Real Estate Settlement Procedures Act requires that you receive a Good Faith Estimate from your lender detailing the loan summary and estimated charges when you originally apply for a loan. At, or before your closing, you should review the HUD-1 Settlement Statement with the final costs of your loan. Your lender will also have provided you the final Truth-in-Lending Disclosure which sets the details of your loan APR, finance charges, amount, and payments.

You will be paying a range of closing costs. These vary according to your loan, terms and your home state. According to Bankrate.com, they will run you an average of 1-3% of your loan amount to the tune of $3,000 - $5,000. These shouldn't come as a shock to you, they're in the Good Faith Estimate. Typically, they may include:

  • Closing Fee

    Paid to the settlement agent who prepared documents, calculated figures, and oversees proper execution of closing documents.

  • Loan Origination Fee

    Covers the lender's cost for obtaining financing, underwriting, and processing your loan.

  • Filing and Recording Fee

    Paid to the county for entering an official record of the change of ownership.

  • Transfer Taxes, Document or Transaction Stamps

    Government fees, including a city, county, or state tax based on the amount of the mortgage and the purchase price.

  • Document Preparation

    Paid to settlement agent for preparing legal papers, including mortgage, deed of trust, note, deed, loan and title documentation.

  • Points

    An up-front fee charged by the lender, each point is 1% of the mortgage amount. Paying these reduces the percentage rate you pay on your overall loan.

The Real Estate Part

These fees are pretty self-explanatory and are primarily paid to third-party vendors who have conducted services involving the sale of the home. They include fees for:

  • Appraisal
  • Inspection
  • Attorneys
  • Credit Report
  • Real Estate Agent
  • Land Survey
  • Title Search and Title Transfer
  • Mortgage Insurance Application Fee
  • Flood Determination
  • Title Insurance

The final two payments are the big ones:

Escrow Account Established for Property Taxes and Insurance

If your lender will be paying your annual real estate taxes and homeowner's insurance, you will be required to set up an escrow account to fund them.

Your Final Down Payment

Whew. Before you know it, you've just finalized your home buying transaction and are ready to embark on your homeowner journey!

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