When first time home buyers sign their very first sales contract, they’ll soon discover the process moves rather quickly. There are multiple people involved all providing various services and documents all in time to meet the closing date. For anyone experiencing something for the first time, it’s definitely a learning experience.
Buying and financing a home is on a much bigger scale when compared to financing a new car for example. There’s a lot more at stake. Still, knowing in advance what to expect at least gives first-time buyers a glimpse at what lays ahead.
There is plenty of behind the scenes activity going on that the buyers aren’t aware of. They have seen an initial cost estimate with a host of charges for services needing to be performed but most of this effort is done outside the bounds of the borrowers. What first time buyers know is when the closing will take place and to expect a final settlement statement that will tell them how much cash they need to bring to the settlement.
Prior to the closing, the mortgage company orders closing papers and requests a final settlement statement from the closing agent. This statement will be compared with the initial loan cost estimate given to them when a loan application is completed. Buyers will review this final statement and compare the final figures with the ones they originally disclosed. There are different types of closing costs but primarily there are the lender and non-lender charges. Lender charges might be something like an underwriting fee or a loan processing fee. The final figures cannot vary from the original disclosure.
The buyers, along with their loan officer, will review this final settlement statement. If lender charges are more than what was originally disclosed, the buyers are not responsible for the increased cost. This rarely happens however as mortgage companies are keenly aware of original disclosures and final settlement charges. Third party charges such as attorney fees, escrow fees, and title insurance do make allowances for differences in initial versus final pricing but no more than 10 percent from the initial quote.
Once the final figures are approved and any necessary changes made, the settlement agent completes preparation for the closing. The closing agent will make sure both the buyers and the sellers sign the appropriate documents and return the signed papers to the lender. Rarely will the sellers and buyers attend the settlement at the same time but in some areas they do. However, most the time they will have separate appointments.
The closing will take up to an hour as the settlement agent provides papers that need to be signed one by one. Buyers will also notice that some of these documents are identical to ones previously signed. This is also normal. Legal documents and final loan papers can require a “wet” signature, signed with a pen. There will be some duplication.
The question of how much cash will be needed at the settlement is also listed on the final settlement statement for the buyers to review. This final amount adds up all the charges from various third parties as well as the lender. The earnest money deposit the buyers made will also show up as a credit and deducted from the overall charges. Buyers will be expected to provide a cashier’s check in the exact amount shown on the final settlement statement. Or, buyers can have their bank wire the funds directly to the settlement agent’s account. This is the preferred method for most closers and more convenient for buyers.
Once the papers have all been signed and initialed where needed, the entire package is then delivered back to the mortgage company. But it’s not over, yet. The lender will review the documents to make sure the settlement agent followed the lender’s instructions. During this time, the lender has set aside the necessary cash to fund the new mortgage.
Once the lender has determined the settlement went as expected, the lender provides the settlement agent with a code, referred to as a “funding number.” This is a code that unlocks the mortgage amount. The loan is now funded. This final review doesn’t take very long, however, and the loan is funded and complete shortly after the final loan documents have been signed.
Buyers that want to learn about the closing process or loan programs can contact us at the number above, or fill out the Info Request Form 7 days a week.