Mortgage Settlement: What To Expect

The process of settlement or closing puts the title of the house in your name, verifies homeowners insurance on the property, commits in writing to the terms of the mortgage and if all goes as scheduled, puts the keys to the home in your hand. As a new home buyer, you will spend weeks - sometimes months - in anticipation waiting to close on your home. Settlement may involve several people and a variety of documents and fees. Once you understand what is involved in closing, the entire process is fairly simple, quick and painless.

Closing procedures will vary depending on where you live. In some areas, buyers and sellers will attend the closing and in other regions, only the buyers are present. Typically, settlement takes place at a title company, escrow company or attorneys office; The location of settlement is based on local laws and customs. During closing, you will hear the words “sign here” by the closing agent more times than you’ll probably care to remember.

Types of Closing Costs

All closing costs are disclosed in the lender’s “Good Faith Estimate.” The Real Estate Settlement Procedures Act (RESPA), requires lenders to provide you with a statement that shows all closing charges within three business days of your application for a loan. Costs will vary significantly from state-to-state, so you should determine ahead of time what you’ll be expected to pay.

Here are the items that you can expect to pay at closing:

• Loan Origination Fees and Discount Points - Charge for the lender’s work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed buy the lender at closing to increase the yield to the lender beyond the stated interest rate on the note. One point equals 1% of the loan amount.
• Application Fee - Charge imposed by the lender which covers the initial cost of processing your loan request and checking your credit.
• Appraisal Fee - This pays for an independent appraisal of the home you intend to purchase. Lender will require this estimate of the market value of the house for the loan.
• Mortgage Insurance - Buyers with less than a 20% down payment may be required to take out mortgage insurance. premiums are typically paid annually from an escrow/reserve account or in full at the time of closing.
• Credit Report Fee - This is typically paid at the onset of the loan approval process.
• Certificate of Title - Detailed examination of the records of property ownership issued by a title company that does the title search.
• Survey - Lender requires an independent verification that your lot has not been infringed upon since the last survey done.
• Homeowners Insurance- Protection against the physical damage such as fire, wind vandalism and other causes. Your lender will require you to have a policy at closing.
• Flood Certification- Some homes require flood certification fees verifying that the property is not in a designated flood zone. If the property is in a flood zone, the lender will require flood insurance in the homeowners policy.
• Recording of Transfer Charges - A fee that covers the cost the paperwork required.
• Interim Interest- Charge for accrued interest from closing date until the end of the month.

Total cost of settlement fees that you can anticipate paying are anywhere from 3% to 6% (for high tax areas) of the amount of your mortgage loan. Again, these fees will vary depending on what region you live in. Because of this, it’s difficult to provide accurate estimates for closing costs that fit everywhere.

Of all the steps in buying a new home, the mortgage closing or settlement probably causes more uncertainty for borrowers than anything else in the buying process. Knowing what to expect will make the entire experience a lot less stressful. When all is said and done, you’ll realize that the actual closing was a walk in the park.

For information of mortgages, visit the experts at New Home Central Lending.

[tag] buying new home, new home purchase, New Home Closing, Closing Costs[/tag]

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