In the first Post of this series “First Time Homebuyers Seminars…..Part #1.” I gave an introduction into the “First Time Homebuyer Seminars” that we at McCue Mortgage, started to promote in September of 2006. This is a different concept in how these Seminars have been done in the past, and so far they have been well received. The second Post of this series “First Time Homebuyers Seminars…..Part #2.” I covered the costs involved in purchasing a home, and presented questions for home buyers to consider as to how expensive a home they can afford to purchase. “First Time Homebuyers Seminars…..Part #3” was about the steps that a Buyer will go though in “Obtaining A Loan.” In this forth and possibly final Post in this series I will cover the process that takes place before and at the Closing, as well as some of the more important documents that Buyers sign when they Close on the house.
I left off on the last Post with the Loan being approved and Commitment Letters being sent to the Buyers, and the Attorney. This sets into motion the final stage in purchasing a house.
Commitment Letter - This letter satisfies what is usually the first date and condition that Buyers must meet on the Sales Contract that pertains to the Loan, and shows that they have a firm commitment for a Mortgage. Once this is done and the Commitment Letter sent to the Buyers and their Attorney (CT is an Attorney State) the Closing process is set into motion.
Conditions - The Commitment Letter will state the final conditions that the Buyers and their Attorney must meet in order for the Closing Department to give the Attorney a “Clear To Close”. The Commitment Letter will always have at least one condition that the Buyer has to meet, and that condition is that the Buyer has to now get a Homeowner’s Insurance Policy and name the Lender on it. There could be other conditions that the Buyer might have to satisfy like provide missing paystubs, bank statements, payoff a judgment or collect to just mention a few of the most common conditions. It will also state the conditions that the Attorney needs to meet. When the Commitment Letter is sent to the Attorney it is accompanied by all of the documents, and contact information that the Attorney will need to prepare documents for the Closing.
Closing Package - Once the Attorney has received the Commitment Letter and the other documents form the Closing Department, the Attorney or his staff will start to put the Closing Package together. I do not go over all of these documents at the Seminar, but I do go over the ones that I consider most important.
- Settlement Statement (HUD-1) - The HUD-1 is basically a financial statement which contains all the costs and credits that both Buyer and Seller will incur or receive on the day of the Closing. For me this is the most important document that both Buyer and Seller will sign on the day of the Closing. I tell the Buyers at these Seminars, that it is very important that they look at every figure carefully and make sure that it is what they expected, if it isn’t, they need to ask question until they are satisfied with the answers. Here in Connecticut the Buyer and Seller will sign 6 – 7 original copies of the HUD-1 depending on the Attorney.
- Truth-In-Lending - They will also sign a new Truth-In-Lending, that has been adjusted to reflect the actual costs which were not known at the time they signed the original one with the Application.
- The Mortgage - This document is the legal device that is used to secure the property. It pledges the title to the property as security for the Loan. This document is several pages long, and will stipulate what the obligations of the Buyers are, and what will happen if they default on the Loan.
- The Note - Is the written promise to repay the amount borrowed to the holder of the Note along with interest. It will state the amount of the debt and the interest rate. Once the Buyer signs this document they are personally responsible to repay the amount stated on the Note. The Note contains a lot of the same terms and conditions that were also stated in “The Mortgage”. They are so similar that many times Buyers think that they are signing the same thing, but it is different and carries different obligations.
Title Search - While the Attorney or his/her staff is putting the closing documents together, the Attorney will either do or order a “Title Search” to be done, to show that there are no liens against the property. The Attorney will also check existing recorded documents at this time to verify the boundary lines of the property. It is a good idea to have the property surveyed to verify the boundary lines that are on record are correct, but a survey is not mandatory.
Title Insurance Policy - Once the Title Search is completed and all the documents that are needed along with it, the Attorney can order a basic Title Insurance Policy. Buyers most often think that this is being done for their protection, but in fact it is done for the Lender, to protect the Lender. Instead of the basic Title Insurance Policy, the Attorney will usually offer the Buyer an “Owners Policy” for a few dollars more which protects the Buyer as well. There is both pro’s and con’s to this, I personally like it because of situations that I have seen where the Buyer had no recourse against the “Title Company” in a boundary dispute.
Closing Date - Once the Buyer has met all the conditions on the Commitment Letter, and the Attorney has prepared all of the documents that are needed to Close, a “Clear To Close” is given and Closing Date can be firmly set. Manny times this date is different from the date that was initially written in the Sales Contract. Either the Buyer or Seller wish to close earlier, or sometimes the Seller isn’t ready to move yet or the Buyer is having trouble meeting their conditions on the Commitment Letter, and they want the date on the Sales Contract moved back. Regardless of the date that is set, it must be set within the “Rate Lock Period” of the Loan. If it is not, then either the Buyer or the Seller will have to incur an additional expense to extend the Rate Lock Period.
Day Of The Closing - Everything is set the Buyer has met all the conditions, the Attorney has prepared all of the necessary documents, the Sellers moved out, and Closing Department has given a “Clear To Close”.
Walk-Through - Sometimes this is done on the day before the Closing but most of the time it is done on the same day before the Buyers come to the Closing. The “Walk-Through” involves the Buyers and their Realtor taking a physical walk through the property and inspecting it to make sure that everything is as they expected it to be. If it is great, if it isn’t then those things will be discussed at the Closing and an agreement on how to remedy the situation will have to be reached before the transaction can be finalized.
Signing Documents - All documents are explained by the Attorney, and signed by usually very nervous Buyers. This is most likely the most money that they have ever committed themselves to, and there is usually a very nervous excitement in the air. I attend my Closings, not because I serve any useful function there, except to offer support to my Borrowers, and their Realtor. Also if there should be a question in regards to the Loan that the Attorney is uncertain about, I can clarify it, as well as contact the proper people if need be.
Keys - Everything is signed by the Buyers and the Sellers, everyone is hopefully happy, and the much awaited “Keys” are exchanged. The Buyers are now the proud owners of the house of their dreams. I do not say this at the Seminar but at this point, I usually give the proud new home owners a nice bottle of local wine, and tell them that I hope they will enjoy it with their first meal in their new home.
Recording The Deed - Even though everything has been signed and keys have been exchanged, one more thing still remains to be done, and that is for the Attorney to formally record the new Deed onto the Land Records, at the Town Clerks Office. Once the Town Clerk has done this a copy will be sent to all those involved in the transaction.
This concludes what I cover at the “First Time Homebuyer Seminars”. I hope that it will prove useful to those that have taken the time to read all four Posts, or that at least has given someone an idea of how to go about conducting a Seminar of their own. If any Buyers have read these Posts, I hope that it will better prepare you for what you will encounter along the way to purchasing you dream home. There might be one more Post added to this series, but that would be directed to those who might want to do one of these Seminars, but are not sure how to go about advertising it to their community.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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