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Closing on a Property, What am I Signing?

So your lawyer calls and says, “You’re set for your property closing on (some date).” What can you expect?

Bring a sturdy pen, because you’re going to be signing lots of documents. Most property closings are actually two closings: the closing on the purchase of real estate and the closing on the mortgage loan you are taking to buy that real estate. All that paperwork will have to do with one or the other.

Autograph Please

Truth in lending statement, also known as Regulation Z. This is where you will see your interest rate, annual percentage rate, amount of the loan and the total cost of the loan over its life. Be sure not to zone out while signing this, you need to double check those numbers.

Itemization of amount financed. Take a close look, this document is like an addendum to the Truth in Lending statement and lists finance costs, such as points.

Monthly payment letter. This is how much you will be paying each month. It reveals the breakdown of your monthly payment into principal, interest, taxes, insurance and any other monthly escrows.

Note. This is the actual loan from the bank. As with other loans, once you sign it, you promise to pay them back.

Mortgage. The mortgage puts a lien on the house as security for the loan -- allowing the bank to foreclose if you default on the note mentioned above.

HUD Form 1 or Disclosure/Settlement Statement. The form will contain all the actual settlement costs and amounts. The closing agent will go over this document with the home buyer and home seller. Pay attention.

Warranty deed. This is the document that transfers the title of property from seller to buyer.

Tax and utility receipts. You'll probably also be signing various city and state receipts acknowledging that this or that has been paid by the seller or will be paid by the buyer.

Search or Abstract of Title. The abstract gives a listing of every document that has been recorded about this particular piece of property. Don't worry, this doesn't obligate you to anything, but it does give you the history of the house.

Money Time

Now is the time for you to shine. By this point, your lawyer should have told you how much to bring for closing costs and you should have a casher’s check for that amount in your hand. You should also have your checkbook as small, additional costs are usually part of the deal.

Closing costs. These can vary from state-to-state and even from county-to-county. Also, most are negotiable (ahead of time), so closing costs can vary greatly.

Payment for the house. This is the balance of the down payment.

Escrows. Often the buyer's annual taxes, insurance and other items are paid through the lender. An escrow account (or reserve) will be established at this time.

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