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Buying a home: What happens at a mortgage closing?

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The home inspections are complete. You have your homeowners insurance. The day you've been waiting for has arrived -- closing day. If everything is in order, a closing process can run smoothly and ownership of the property will be transferred to you with no hitches.

Before the congratulations are given and house keys are handed over, you, the homebuyer, are expected to go to the closing table actively engaged and prepared to seal the deal.

Scheduling the closing

The most important item a homebuyer can take to the closing table? Patience, says Walter Walker Jr., director of education and counseling for Housing and Education Alliance, a housing counseling agency in Tampa, Florida.

Walker warns buyers not to close on their lunch hour. An hour might not be enough. Rather, he says, take off a day or half-day.

He also recommends scheduling the closing date around the 20th or 25th of the month, rather than the last day of the month, to allow time to address any last-minute problems.

Why avoid end-of-month closing?

"If something goes wrong, (you) want to have a couple of days to attempt to resolve the problem that exists," he says. "Also, everybody wants to close on the last day of the month. What happens if, for some reason, there's a mechanical breakdown -- the office printer breaks down and it's 5 o'clock in the afternoon and your mortgage company is about to close?"

If a closing scheduled on the last day of the month is not completed that day, you will have increased closing costs, beginning at the start of the next month. That's because prepaid interest due at closing accumulates throughout the month, but it can be avoided or reduced if the closing is near the end of the month.

Final walk-through

Buyers are often allowed to do a final walk-through inspection 24 hours before closing to determine if any damage was done to the property between contract and closing, and to negotiate any necessary repairs with the seller, says Mary Beth Rapice, a real estate attorney for the Pullman & Comley law firm in Bridgeport, Connecticut.

Take all the documents

It is important for you to take to the closing table every document received throughout the homebuying process, Rapice says. These include the good faith estimate and proof of homeowners insurance.

"It's always good to bring a copy of your contract, a copy of your inspection reports and any documents that you had delivered to the bank so that they could approve you for the mortgage," Rapice says.

A roster of closing-day players

While closing practices vary from state to state -- and even locality to locality -- the following parties are generally present at the closing:

  • Home seller.
  • Seller's real estate agent.
  • Title company representative.
  • Attorney(s): The buyer and lender may have attorneys.
  • Closing agent: This person conducts the meeting and makes sure all documents are signed and fees and escrow payments paid.
  • Mortgagor (you).
  • Mortgagee (lender).

Documents you will receive

During the closing meeting, the seller signs certain documents transferring property ownership. You receive and sign documents related to the mortgage agreement and ownership of the property, and pay any closing costs and escrow payments. These include:

  • The settlement statement detailing all of the costs related to the home sale.
  • Mortgage note stating the buyer's promise to repay the loan.
  • Mortgage or deed of trust securing the mortgage note.

"It's very helpful for homebuyers to be able to review all of the closing documents before they get to the closing table," says David Adamo, CEO of Luxury Mortgage Corp. in Stamford, Connecticut. "This way, they are informed and prepared when it comes time to sign all of the closing documents."

What can go wrong?

Real estate attorney Neil Garfinkel offers a "closing nightmares" list: a lender pulling out at the last minute and not financing the property, a buyer not having enough money or a seller not clearing up property liens.

Failing to complete the final walk-through prior to closing is a significant issue as well. Garfinkel, a partner with Abrams Garfinkel Margolis Bergson in New York, says buyers have neglected to do final walk-throughs, but have asked the sellers to set aside money for any repairs. "That's just a no-no; that's not happening."

Another action can cause problems at the closing table: when the buyer's financial circumstances change. Opening a new credit account, securing a new auto loan or charging up an existing credit card can delay or even cancel your mortgage closing.

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To lessen the chances of problems arising at closing, Rapice advises potential homebuyers to research the entire homebuying process with an attorney or mortgage lender.

"Understand what the total cost of the transaction will be to you. It's not just the purchase price and attorney fees; there are a lot of other costs involved," she says. "It's more than what appears to the naked eye; it's not just going and finding a house that you are in love with and deciding to buy it and deciding to get a mortgage."


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