This guide will cover the frequently asked question on real estate closing. Does the real estate closing costs process different vary from state to state? We will first start discussing real estate closing and how the real estate closing process work on home purchase and refinance transactions. We will then dive into real estate closing costs. What real estate closing costs entails will be covered in this guide. John Strange of Gustan Cho Associates explains real estate closing costs.
All home purchase and refinance transactions require closing costs which are the costs of creating the mortgage loan. Closing costs are any costs associated with making your loan such as origination charges, appraisal, title, attorney costs, pre-paid, transfer stamps, recording fees, and any third-party fees and costs incurred for the origination and funding of the loan.
What Is a Real Estate Closing
The real estate closing is a process that finalizes the home purchase process. Once a home buyer enters into a real estate home purchase contract, there is a closing date on the contract that states the date of the real estate closing. Real estate closing dates can get delayed and often does. Marga Jurilla, the National Operations Manager at Gustan Cho Associates, explains delays in real estate closing:
There is no reason why a buyer should not meet the home closing date. However, the loan process is a process where delays can happen. The most important part of the mortgage loan processis the pre-approval stage.
Over 80% of the borrowers we represent go through major stress during the mortgage process or get a last-minute loan denial. The only reason is that the loan officer did not properly qualify the borrower. All of the pre-approvals at Gustan Cho Associates close, and they all close on time. In this section, we will cover tips for borrowers and loan officers to ensure the real estate closing closes on time without stress.
What To Expect in The Real Estate Closing Process
Again, the most important mortgage process stage is that the loan officer properly qualifies borrowers. A pre-approval should never be issued to close home loans on time unless the borrower is fully qualified. There are protocols loan officers can take to avoid real estate closing delays, explains Alaina Phillips, a dually licensed loan officer, and real estate agent.
Loan Officers must thoroughly review borrowers’ credit reports and look for credit disputes. Credit disputes on non-medical collections and charge-off accounts are not allowed.
Credit disputes on late payments are not allowed. Credit disputes on zero balances on non-medical disputes are exempt and are allowed. Credit disputes on medical collections are exempt. All documents submitted need to be completed with no missing pages. Once borrowers get conditional loan approval, get the conditions ready and as complete as possible and submit.
How Long Does the Real Estate Closing Process Take
Borrowers who are experiencing a lack of communication with their loan officers and are getting delayed with a clear to close, contact us at Gustan Cho Associates.
Transferring a loan from one lender to another is simple. FHA appraisals can be transferred. Again, there is no reason for stress during the mortgage process or closing delays. Homebuyers and home sellers are present. Much paperwork needs to be signed by the home buyer, especially paperwork by the lender. Attorneys, if used, are present at real estate closings. Realtors or loan officers may be present at closings. Once all paperwork is signed, it gets emailed back to the lender, where the lender gives the thumbs up to fund the loan.
What Is The Closing Disclosure
Three days before a real estate closing, borrowers must receive a Closing Disclosure from their lender. The Closing Disclosure is a five-page document stating the mortgage loan details. The CD will list the key points of the home closing and the number of fees and costs involved in getting the mortgage loan closed. Ami Thakkar, a senior loan processor at Gustan Cho Associates, explains what happens at the real estate closing:
Paperwork needed to be signed can be overwhelming, especially for first-time homebuyers. Most buyers sign massive amounts of paperwork without thoroughly reading all the fine print. However, a title agent or attorney will brief them and summarize their signing paperwork. The HUD-1 Settlement Statement was replaced with the Closing Disclosure or CD.
The Closing Disclosure is an extension of the Loan Estimate, which was disclosed during the initial loan application stage of the mortgage process. The Good Faith Estimate or GFE replaced the LE or Loan Estimate. All line items disclosed on the Loan Estimate cannot increase by more than 10% except for the home appraisal, or the lender needs to cover the overage.
The Makeup of the Closing Disclosure
Again, the Closing Disclosure is a five-page document that needs to be disclosed three days before the real estate closing. Below is what is covered on the CD:
- Page 1: The first page of the CD contains information and the terms of the loan and anticipated fees and costs at closing
- Page 2: The second page of the CD contains the details of the closing costs and other fees incurred with the loan
- Page 3: Page 3 of the CD discloses the cash that is needed to close and the overall outline of the loan transaction
- Page 4: Page 4 of the CD contains additional detailed information on the loan terms
- Page 5: Page 5 is the final page of the CD, and it discloses the terms, loan calculations, and contact and disclosure information.
There may be little cost and pricing adjustments that need to be done at the closing table. Cost and fee adjustments at closings include adjustments for property taxes and other expenses, such as sellers’ concessions or overages of seller concessions.
When Can You Move In After Real Estate Closing
Homebuyers can move in after the real estate closing. The real estate closing is when ownership changes hands. The buyer gets the title, the keys, and home ownership. The seller relinquishes ownership, forfeits all property left in the home, surrenders all keys, and gets paid. There are certain states, like Illinois, where property taxes are paid in arrears. Illinois home buyers will get property tax prorations from home sellers. Buyers can use property tax prorations for their down payment and closing costs. However, they cannot use sellers’ concessions for their home purchase down payment. Any overages of seller concession must go back to the home seller, and no kickback is allowed—Real Estate Closing normally at a title company or attorney’s office. The mortgage lender will send important mortgage loan documents and wires to the title company. A title officer quarterbacks the real estate closing. Real estate closing is normally a happy occasion for all parties.
