BUYING A HOME: CLOSING THE DEAL
It’s almost done! With just a few steps away, the house that you have been dreaming of will be yours.
But before anything else, you will need to review and understand the HUD-1 form, a paper outlining all charges levied on a borrower and seller in a real estate transaction. Also known as closing sheet or settlement form, it provides a complete list of incoming and outgoing funds. You should have received this form in the early parts of your loan process. This is similar to the good faith estimate, except its closeness to your closing date. But this is still considered an estimate. So it is important to have a cushion money for payment in case the estimates are low.
Estimates should be pretty accurate and most of the extra cash should be returned to you after closing, alongside a closing statement indicating the costs incurred for every item on the form. Fees on the HUD-1 form and closing statement include loan origination fee, title report fee, escrow fee, points (if paying any), and seller credit (if any).
Compare the numbers on the HUD-1 form and the good faith estimate given to you to make sure the amounts are correct and the charges are not unjustifiably high. If you notice any discrepancies on the figures, have it fixed the soonest time possible. But remember, the time to be consumed in correcting these items may defer the closing, and delayed closing can lead to paying penalties.
When it comes to signing the loan paperwork, some agents may pressure you to read the provisions quickly. Do not give in to the pressure, as loan documents are 100 pages long. Read and understand the items to ensure there are no mistakes or unusual clauses. The loan officer should also be present or readily available by phone to answer any queries about it. The escrow company will execute the closing instructions after you sign the papers, and loan funds will be given to the seller. The property will be named to you, and city or country will be notified of the dealing and record you as the new owner of the house upon giving the funds to the seller.
If you are renting, notify your landlord about it once you have the keys to your new property. It is not advisable to give notice before the purchase transaction is closed, since some things can go wrong during the process and the sale might fail. Buying a house is a tedious process, so you do not want to end up finding a new place to stay for just a few days’ notice.
And most importantly, do not forget to create your emergency cushion. Chances are you will have a lot less cash after closing because of the down payment and closing costs, not to mention you gave a higher monthly housing payment than your rental payment. Nevertheless, rebuild your cash savings for future expenses.
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