Home Loan Closing Roadmap

"Closing" is the last step in refinancing your home or borrowing against your home equity. Here's what to expect and what's important to know in the closing process.

 

Congratulations! You've found the best deal for you on a mortgage refinancing loan or a home equity loan or home equity line of credit. Before you take advantage of your new refinancing or home equity loan or line of credit, there's one last step called "closing."

Here's what happens in the closing process, who may be involved, what fees and paperwork may be involved, and other important things to know.

What Happens at the Closing?

Closing is where you "seal the deal" by signing the necessary paperwork and paying any fees to make your loan official.

Every state has different laws and requirements for the closing process, and lenders have different requirements for the closing process, but the basics are fairly standard.

Because refinancing is a lot like applying for your original mortgage, the closing process for refinancing is similar to closing on a mortgage.

Who's Involved?

Here are the "key players" who may work with you during the closing process:

· Closing Agent: A representative of your lender who handles the details of the closing process, such as putting together the necessary paperwork and keeping track of closing costs.
· Attorneys: You and/or your lender may hire attorneys to write and review any legal documents.
· Other important people, such as title professionals and appraisers.

In some states, a closing meeting is not required. Even if you don't have a closing meeting, it's important to talk to these people and get expert advice during the closing process.

What Fees are Involved?

The closing is when you make your down payment and pay and fees involved with your refinancing loan or home equity loan or line of credit.

Some fees, or closing costs, you may need to pay at closing time, others you may have paid earlier, and still others may be included in your monthly payment or in another loan.

Your lender may not accept a personal check for closing costs, so bring a cashier's check or a certified check for the total amount in your settlement statement.

These fees may include:

· Application Fees: The lender's fee for starting the application process.
· Appraisal: An official estimate of how much your home is worth by a real estate professional.
· Credit Check: A fee for checking your credit report and credit score.
· Home Inspection: The cost of inspecting your home to make sure it is in good condition.
· Legal Fees: Any fees involved in working with the legal system, such as review of paperwork by a legal professional or fees for filing legal papers.
· Origination Fees: The lender's fee for opening your loan account.
· Points: A fee to reduce your interest rate that is typically one percent of your total loan for every percentage point.
· Title Insurance: Insurance to protect you and your lender against costs involved in property ownership disputes.
· Title Search: Fees involved in checking legal records to verify property ownership and any restrictions on the property, such as liens or covenants.
· Prepayment Penalties: Your current mortgage may carry a fee if you pay it off early.

What Paperwork Will Be Involved?

Closing also involves reading and signing paperwork. Here are some of the papers you may sign at closing time:

· Settlement Statement (HUD-1 Form): This document is the final list of all of your closing costs.
· Truth-In-Lending Statement (TIL Statement): This document contains the details of your loan, such as your monthly payment, interest rate, and term.
· Promissory Note: This document is a promise between you and your lender where you promise to pay your lender according to the terms of your loan.

The law may require your lender to show you these papers during the closing process, and to make them available for you to read before you sign them. The exact paperwork depends on the type of loan you choose, where you live, and other factors.

What Else Should I Know?

At closing time, here are some things to think about:

· Make sure to get any promises or details in writing.
· Read everything carefully before you sign it.
· Ask legal, financial, and real estate professionals to help you understand anything that isn't clear.
· Avoid signing or agreeing to anything you don't understand or that seems too good to be true.

 

These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action.