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Your loan closing: What you can expect

You’ve pinched your pennies, toured dozens of properties, prequalified for a mortgage loan and finally put an offer in on your very first home. And it was accepted! You then wait patiently for 30 days and 30 nights for your loan closing date to arrive.

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When you start thinking about your loan closing date, your heart begins to beat a bit faster. You realize you’re making the most important financial decision of your life! (So far, anyway.)

As a first-time homebuyer, you may be wondering what you can expect at your loan closing. You’re probably feeling all the feelings — excitement, happiness, exuberance — but the practical side of you wants to be prepared for every possible scenario. You’re in luck: This article spells out everything you’ll encounter at your loan closing so you know just what to expect.

What is “closing” a mortgage loan?

It’s the final step in the process of buying and financing a home. It’s also called the “settlement.” This is when you and all the other parties in the loan transaction sign legal documents and distribute funds, after which you become responsible for the loan.

When you purchase a home with a mortgage loan, you typically close your loan (meaning funds are distributed) and close your home purchase (meaning you are now the owner) at the same time. Here’s what you’ll need to bring to your loan closing:

  • Paid receipt for your first-year’s premium of homeowners insurance
  • Certified or cashier’s check for your down payment and closing costs

What do you mean, “other parties”?

You’ve probably realized by now that there are lots of people involved in your home purchase and financing. Your closing could include the following parties:

  • Your title insurance company
  • An escrow company
  • Your lender
  • A loan officer
  • A closing agent
  • Your attorney
  • The seller’s attorney
  • The seller

Typically, everyone sits around a table and signs all the documents at once (there are a lot of them), although there’s no such thing as a “standard” closing procedure followed in all areas of the country.

Do I really have to read and sign all those documents?

You bet. Why is actually reading the documents so important? Well, you probably shouldn’t sign them if you notice errors or don’t understand the loan terms, or the loan amount is different from what you expected. Better to be safe than sorry — taking responsibility for a mortgage loan is a real commitment, and it will have a serious financial impact on your life. Don’t hesitate to ask questions.

You’ll also want to be sure you understand how your payments could change over time, for example, if you’re taking out an adjustable-rate mortgage. Even with a fixed-rate mortgage, your total monthly payment could change over time due to fluctuations in taxes or insurance.

So what will actually happen when I get to my loan closing?

Signing the documents

Did I mention you’ll receive a lot of documents to sign? A lot. Some of these documents are:

  • The Closing Disclosure: You’ll receive the Closing Disclosure three days before your scheduled closing date. This document contains the final loan terms and closing cost details, and you should carefully review it to be sure the details are correct. It should look the same as the initial Loan Estimate you received from your lender.
  • The Mortgage Note: This is your promise to repay the loan to your lender.
  • The Mortgage or Deed of Trust: By signing this, you agree that your lender may foreclose on the home if you fail to repay.
  • The Deed: This document transfers legal ownership of the property to you.

Proof of insurance

You’ll show proof of homeowners insurance and go over any applicable tax items. You need to prove you have insurance so the lender will actually fund the loan.

Transfer of funds

This is when you pay your down payment and any closing costs to the closing or settlement agent with a certified or cashier’s check.

Transfer of ownership

After you sign all the documents and pay your closing costs and down payment, the closing is finished. Your possession date (the day you can move into your new home) is stated in the purchase agreement. If your possession date is the same day as your closing, you’ll finally receive the keys to your new home!

And even if everything doesn’t go according to plan, don’t panic. At my first loan closing, the fax machine broke (along with my heart) and the loan officer couldn’t send our lender some final documents to approve. It was almost 5 p.m., and the lender’s office was about to close. I had just started frantically dialing my parents’ phone number to see if they would welcome house guests when the machine whirred to life at the very last minute (4:57 p.m., to be exact). All I can say is, the universe (and apparently, its fax machine) works in mysterious ways.

If you’d like even more detailed information about what you can expect at your loan closing, check out the Consumer Financial Protection Board’s in-depth checklist or visit consumerfinance.gov

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