Real Estate Closing - Tips on the Final Forms & Closing Costs
Real estate closing costs can be quite expensive. You need to understand the documents that are associated with closing your real estate purchase or those expenses can get a lot more hefty.
Real Estate Forms You’ll See at Closing
- Promissory Note- this is a document that shows how much money you promise to pay back to your mortgage lender.
- Truth in Lending Statement- This statement shows your interest rate, annual percentage rate, the amount of money that you are financing, and the total cost of the mortgage loan.
- Mortgage or Deed- this document puts a lien against your property in case you do not pay your monthly payments as promised.
- Monthly payment letter- this document explains your monthly mortgage payments. It tells you how much money goes to principal, taxes, interest, and insurance.
- HUD-1 Settlement form- the HUD statement is the settlement statement of fees. This HUD statement explains all of the fees that the buyer and the seller will need to pay for.
- Warranty Deed- this document transfer the property from the seller to the buyer.
- Proration papers- this document explains how the buyer and the seller will address the property taxes, interest, and any other fees that are due within the month that the real estate closing occurs in.
- Statement of Information- this document basically makes sure that no one with a similar name to yours in confused as the owner of your property.
- Declaration of Reports- this document shows that the person who is buying the real estate has seen the inspection and survey and that they have signed off on everything.
- Abstract of Title- this document shows all of the documents that have been recorded that relate to the title of the real estate.
- Certificate of Occupancy- this is a legal document that you have to receive from the building department. It states that people can now occupy the property.
You need to make sure that you review your HUD statement carefully. You need to know what fees you are responsible for. If you are unfamiliar with any of the documents that you are asked to sign then speak with a real estate agent or an attorney. Understanding mortgage loans can be confusing so don’t hesitate to ask for assistance. It’s your money is on the line so you need to act responsibly.
People should not rush into their mortgage loans. Buyers need to find the mortgage loans that have the best interest rates and terms possible.
Closing Costs Associated with Your Real Estate Closing
- Title service closing costs- these costs cover title search, title insurance and other title related services and expenses.
- Recording fees- these fees are paid by either party. This fee is required because you have to pay the government to record the deed and the change of ownership of the property.
- Survey fee- you have to pay for a survey to be done on the lot of land and the buildings that are on the land. This survey needs to confirm the size and dimensions of the land to make sure that they are accurate.
- Brokerage commission- this fee is paid by the seller to their real estate broker. The fee covers the broker’s services such as: marketing the real estate property, finding a buyer, and negotiating the real estate purchase. The brokerage commission is usually a given percentage rate of the entire real estate purchase.
- Mortgage application fees- the buyer has to pay this fee to their mortgage lender. The fees
- cover the loan processing of a mortgage application.
- Points- these are paid to the mortgage lender by the buyer. They are a form of pre paid interest. The prepaid interest is charged by the mortgage lender instead of charging a higher rate of interest on the buyer’s mortgage loan. One point is equal to one percent of the amount of principal.
- Appraisal Fees- these fees are usually paid for by the buyer. This is to pay for the appraisal of the real estate to make sure that it is worth the fair market value.
- Inspection fees- these fees are usually paid for by the buyer. An inspection is necessary to make sure that the home is in good condition and that it does not need too many repairs. The buyer usually conducts an inspection so they need to pay for the inspector’s fees and services.
- Prepaid Property Insurance- this is usually paid for by the buyer. Mortgage lenders want to make sure that even through the real estate closing process that the property is insured in case of a fire or accident.
- Pro rata property taxes- these taxes can be paid by either the buyer or seller. This ensures that the buyer and seller each pay their portion of the required property taxes.
- Pro rata interest- is usually paid for by the buyer. It is the adjusted interest payment since the first payment is not due yet.
Understanding your real estate closing can be difficult. There are many documents to read, understand, and sign. You need to make sure you understand the amount of money and the fees involved so that you can budget your expenses accordingly. Hopefully, you will have a successful real estate closing.