Owning and Renting Property

4 Tips to Prepare for Closing on Your Home

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You may have heard about the loads of paperwork you’ll have to sign when you close on your new home. How can you be prepared for all the documents you’ll be asked to review — and presumably understand? Here are some helpful tips from ARAG Network Attorney Frederick Anderson.

1. Understand there are really two closings.

Anderson explains there are usually two closings for the buyer: one that involves the lender for the funding of the transaction and one for the purchase transaction.  “I’d estimate that 60 percent of the time, they are completed together; however, even when they occur in the same office, it’s important to remember they are two distinct closings,” Anderson says.

2. Get a head start on reviewing closing paperwork.

For both transactions, Anderson suggests the buyer gets all the documents before the closing and look them over; that way the review doesn’t occur while everyone is sitting and watching. “It’s a good way to save time and possibly address any questions or mistakes in advance,” he notes. “For example, the lender has its ‘forms’ and it takes a tremendous effort to have them change language unless it is really wrong. However, some of the form language may be wrong for the transaction.”

3. Know about the critical closing documents.

Every legal and financial document tied to a closing is important, but there are a few that are critical to the process. Anderson points out, “The settlement statements are the keys to the financial side of each transaction, so make sure the figures are reviewed for accuracy and questioned as to how calculated. The next key documents on the financing side should be the promissory note and mortgage. The mortgage is the actual legal document that is filed with the recorder to secure the lender's lien on the real estate. Overall, the terms of the deal should be correct. The lender is not infallible and can make mistakes.”

Anderson says that on the purchase side, the key document is a title opinion, which is needed to find out who owns the real estate in order to accurately transfer it and whether there are any liens or objections that need to be taken care of before the transfer. He adds, “Then there’s the warranty deed, which needs to accurately reflect the seller, the legal description of the real estate, and how the buyer(s) want to take title.”

4. Ask questions if it’s over your head.

During both closings, there’s a lot going on. The deed of title is delivered to the buyer, the title is transferred, financing documents and title insurance policies are exchanged, and the agreed-on costs are paid. Some of the final documents, including the deed and mortgage or deed of trust, are signed by the appropriate parties, and then delivered to the county recorder to be recorded.

If you’re not a real estate attorney or a realtor, chances are these documents are going to appear foreign to you, a blur of legal and financial terms you’re expected to understand and agree to.

Anderson encourages his clients to review all the documents to understand them as much as they can and ask questions of anything they do not understand. “This is usually the largest financial transaction you’ll complete in your lifetime, so you should feel comfortable with the process and the documents. I also recommend using legal counsel if you need advice.”

Are you thinking of making the move into a new home? Learn more about all the steps involved.

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