Simplifying the Escrow Process

So there you are, just a few steps away from becoming a homeowner. After finding the perfect house and navigating through the maze of paperwork and securing that mortgage, it now winds-up to the “settlement” or escrow. This is the day when you, the new home owner finally sits down with all the involved parties to make the deal official. What can you expect during this part and what can make you better prepared for it? Before entering the closing negotiations, it is a must that you understand the process. Knowing how the process works will make you ask the right questions and clarify issues as needed. Forgotten details may lead to delayed or even cancelled home sales. Do your homework first. Before sitting down and closing the deal, talk to the professionals who represent the home seller and ask them what you should expect. Then, identify and gather up all the documents that you should bring to the closing negotiations. Also read and review your loan documents. Remember that any missing details in loan documents can either lead to mistakes in the paperwork or result in a product or payment scenario that can leave you unhappy. Reviewing loan documents will iron-out any potential kinks or misunderstandings before they occur. Lenders generally are required to provide you with the appropriate loan documents, by request, at least 24 hours before the closing. Review your closing disclosure form. If you are getting a loan, one of the best ways to prepare is to review your HUD-1 settlement statement. The HUD-1 settlement statement outlines your exact mortgage payments payments, a loan’s terms (such as the interest rate and term) and additional fees you’ll pay, called closing costs (which total anywhere from 2% to 7% of your home’s price). Compare your HUD-1 to the good-faith estimate your lender gave you at the outset and make sure they’re similar and ask your lender to explain any discrepancies. You will receive your HUD-1 three days before closing, thanks to new regulations put in effect in October 2015. Aside from the paperwork review, also do a walk-in of the house before the closing. A buyer’s contract usually allows for a walk-through of the home 24 hours before closing. Make sure the home is in the condition agreed upon in the contract. If you’d had a home inspection done earlier and it had revealed problems that the sellers had agreed to fix, make sure those repairs were made. If you find an issue during the walk-through, bring it up with the sellers as soon as possible. It is best that all the issues are resolved before closing. After reviewing the final version of the documents, reread the contents carefully to make sure you really understand what you are signing. It is best to consult with a lawyer at this point. Finally, make sure you have the following materials from the home buying checklist on the morning of closing: – A check. The loan documents should spell out the amount that you are required to bring to the closing. You may also need to certify the check so that the lender will accept it. You may have the option to wire transfer the funds, but this can take longer and delay closing. – Copy of your photo ID (Note to newlyweds who just changed their name: That ID needs to match the name that will appear on the property’s title and mortgage.) – Homeowners insurance policy – Good faith estimate – Loan documents What to expect at closing? At closing, you will be sitting with the home seller, the seller’s real estate agent as well as your own, buyer and seller attorneys, a representative from a title company (more on that below), and, occasionally, a representative from the bank or lender where you got your loan. Most lenders will also require a title check of public property records just to make sure there are no liens or issues with transferring the property to your name. Also expect a lot of signing on legal documents that may leave you with a bit of a hand cramp. And finally, if all goes well, you will eventually walk away from the home closing with a stack of documents in your arms and the keys to your new home!