Closing on your home is the last step in the purchasing process. The closing is the appointment whereby legal ownership of the property is transferred to you from the seller.
Very often closings take place at a title company, and the closing agent coordinates the paperwork and signatures needed to make the transfer. Also, after the closing is complete, the closing agent will ensure the transfer is recorded with the county where the property is located.
Most transactions will involve some costs at closing. The details of those estimated costs are provided to you by your Loan Originator on the Good Faith Estimate (GFE). Closing costs can include at least some of the following charges:
- Credit report fee
- Origination fee
- Discount points
- Appraisal fee
- Title search fee
- Recording fee
- Other costs as disclosed
Actual closing costs for your transaction are disclosed on the settlement statement at closing. Please consult with your loan originator for more information on closing costs associated with your loan.
You are required to carry title insurance as part of your loan agreement. A title insurance company will make certain the property you are going to purchase has a clear title, free of liens and claims to the property. In that way, the bank can be sure the property can be transferred to you as owner.
Title insurance companies typically provide two kinds of insurance policies:
- Owner's Policy (covers the homeowner)
- Lender's Policy (covers the bank)
If you are purchasing a home, you will typically receive an Owner's Policy and purchase a Lender's Policy. Your loan originator will provide additional information.
The title company will conduct research to make sure the title is clear to transfer to your name. If there are problems with the title (for example, if someone has an interest in the property), they can often be resolved before you close on the property.
After you are covered under a title policy, it will cover any claims made against the property, including legal fees involved to deal with such claims. Your policy will remain active as long as you (or your heirs) own the home.
Mortgage insurance is required when a borrower purchases a home with less than a 20% down payment. The insurance protects the bank so they are able to offer more loans with lower down payment requirements.
The cost of your mortgage insurance depends on several factors (such as your loan-to-value ratio) and is typically incorporated into your monthly mortgage payment. Your loan originator will be able to explain the amount you are charged in mortgage insurance in more detail as well as when you may be eligible to cancel the insurance.
Loans are subject to credit approval. Some restrictions and loan fees may apply.
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