This Article Is About Real Estate Closing And Mortgage Process For Borrowers
Real estate closing on a home purchase is often a very exciting time for both home buyers and home sellers.
- Buyers will get the keys to their home and the title of the home transferred into their name
- Sellers of the home will get the proceeds from the sale of the property
- However, it can be confusing also due to the mass paperwork that is involved and needs to be signed
- It is unlike purchasing any other item where buyers need to pay for the merchandise and get a one-page receipt for the purchase and the transaction is complete
In this article, we will discuss and cover the Real Estate Closing And Mortgage Process For Borrowers.
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 where it states a date of the real estate closing
- There is no reason why a buyer should not meet the date of the home closing
- However, the loan process is a process where delays can happen
- The most important part of the mortgage loan process is the pre-approval stage
- Over 75% of the borrowers who we represent are folks who are going through major stress during the mortgage process or get a last-minute loan denial
- The only reason for this is because 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.
How To Make Sure That Buyers Close Their Loan On Time
Again, the most important stage of the mortgage process is that the loan officer properly qualified borrowers.
In order to close home loans on time, here are tips for both borrowers and loan officers:
- Loan Officers need to thoroughly review borrower’s credit report 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 needs to be completed with no missing pages
- Once borrowers get conditional loan approval, get the conditions ready and as complete as possible and submit
- Open communication between borrowers and loan officer is a must and a necessity
- Returning phone calls and/or emails in a timely manner is important and not responding to each other is a major reason why the mortgage process gets delays and closings get delayed
Borrowers who are experiencing a lack of communication by their loan officers and are getting delayed with a clear to close, contact us at Gustan Cho Associates. Transferring a loan from a lender to another is simple and FHA appraisals can be transferred. Again, there is no reason for stress during the mortgage process or closing delays.
Here are things that are done on real estate closing
Real Estate Closing normally is at a title company and/or attorney’s office:
- Mortgage Lender will send important mortgage loan documents and wire to the title company
- A title officer quarterbacks the real estate closing
- 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 and/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.
Real Estate Closing Documents
Paperwork that is needed to be signed can be overwhelming, especially for first-time homebuyers.
- Most buyers just sign the massive amounts of paperwork without thoroughly reading all the fine prints
- However, a title agent and/or attorney will brief them and summarize the paperwork they are signing
The HUD-1 Settlement Statement was replaced with the Closing Disclosure or CD.
What Is The Closing Disclosure
Three days prior to a real estate closing, borrowers need to receive a Closing Disclosure by their lender.
- The Closing Disclosure is a five-page important document that states the details of the mortgage loan
- 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
- The Closing Disclosure is an extension of the Loan Estimate which was disclosed during the initial loan application stage of the mortgage process
- The LE or Loan Estimate was replaced by the Good Faith Estimate or GFE
All line items disclosed on the Loan Estimate cannot increase by more than 10% with the exception of the home appraisal or the lender needs to cover the overage.
The CD needs to be disclosed three days prior to the real estate closing and has the following line items:
Again, the Closing Disclosure is a five-page document that needs to be disclosed three days prior to the real estate closing.
Below is what is covered on the CD:
- The first page of the CD contains information and the terms of the loan and anticipated fees and costs at closing
- The second page of the CD contains the details of the closing costs and other fees incurred with the loan
- Page 3 of the CD discloses the cash that is needed to close and the overall outline of the loan transaction
- Page 4 of the CD contains additional detailed information on the loan terms
- Page 5 is the final page of the CD and it discloses the terms and loan calculations as well as contact and disclosure information
There may be minor cost and pricing adjustments that need to be done at the closing table.
Examples of cost and fee adjustments at closings are the following:
- Adjustments for property taxes
- Adjustments for other expenses such as sellers concessions and/or overages of sellers concession
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 the down payment of their home purchase. Any overages of sellers concession need to go back to the home seller and there is no kickback allowed.