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| LOAN PROCESS |
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Closing |
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What's Involved in the Closing Meeting? |
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What costs will I pay at closing? |
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Who will be at Closing? |
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What type of inspections do I need before I close on my home? |
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How long does it take to close my loan? |
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How can you close my loan if you are not in my area? |
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When will I know the exact amount of money that I will need at closing? |
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Will I need to have an attorney represent me at closing? |
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Can I get advanced copies of the documents I will be signing at closing? |
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Do I have to attend closing? What are my options? |
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How soon after I sign loan documents will my loan close? |
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If my loan is closing around the first of the month, should I still make my payment to my current lender? |
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If I am receiving cash out at the end of the transaction, how will I receive my proceeds? |
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If I am receiving a home equity line of credit, how do I receive my draws on it? |
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Tell me more about mortgage loan closing fees and how they are determined. |
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How much title insurance do I need? |
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How much homeowner's insurance does a lender require? |
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How do I know if I need flood insurance? |
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I've heard that some lenders require flood insurance on properties. Will you? |
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What happens to my loan after it closes? |
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Can I bring a personal check to the closing? |
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If I apply for a mortgage loan where will the closing take place? |
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What's Involved in the Closing Meeting? |
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Preparing for Closing
Many things must be taken care of before you come to the closing meeting. Ask your lender for a list of your responsibilities so you can arrive fully prepared.
Set a Closing Date
When choosing a closing date give yourself time to gather all your information and free up any necessary funds. The lender will need time to prepare and deliver loan documents (usually 3-5 days), home inspections must be scheduled and if any repairs are needed allow enough time for them to be completed. Also, if your rate is locked in, make sure you close before the deadline so you'll be guaranteed the quoted interest rate.
Other Required Items
Your lender will provide you with a commitment letter that lists all the other documentation that's required at closing. The following are common examples.
- Survey - This shows the property's boundaries and any improvements made to it. It also details any encroachments on the property like fences or buildings. Major encroachments must be corrected before closing.
- Termite Inspection - Many areas legally require homes to pass a termite inspection, and all FHA and VA loans require one. If a termite inspection is required you must bring the certification to closing.
- Homeowner's Insurance - Lenders require you to carry insurance for the replacement cost of the property. Bring the policy with you to closing.
- Title Insurance Policy - All lenders require title insurance to protect them against claims of property ownership by anyone other than the borrower. The title insurance issues the policy company after conducting a title search.
- Flood Insurance - A flood insurance policy is necessary for any property located in a flood plain.
- Water and Sewer Certification - If the property isn't served by public water and sewer facilities you'll need certification from the local government that you have a private water source and sanitary sewer facility.
- Certificate of Occupancy - For a new home you'll need one of these before you move in. The builder should get it for you from the city or county.
- Building Code Compliance - An inspection is often required to make sure the property conforms to current building codes. There will be an inspection fee, and the contract should specify who pays for any repairs needed to bring the home up to code.
Final Walk-Through
A day or two before closing it's a good idea to take one last look at the home to make sure repairs have been made, there's no new damage, and anything meant to be sold with the property is still there. You can do this on your own or with your real estate agent.
Closing Costs
One business day before closing your lender must allow you to review your settlement statement.
Settlement Statement
This is the final exact amount you'll owe at closing and it must be brought in the form of a certified or cashier's check. (Our Closing Costs Checklist can help you keep track of these expenses.)
The Closing Meeting
The legal sale and purchase of your home happens at the closing meeting which is attended by the buyer (you), the loan officer, the seller and any real estate agents or attorneys involved. (In some areas, closing is done by an agent without a meeting.)
Examination and Signing of Documents
At the closing meeting, the closing agent will review the settlement sheet with you and the seller and ask you both to sign it. This is also when you'll present evidence of insurance and inspections and sign all other loan documents.
Payment of Closing Costs
Once all papers are signed and in order you'll hand over the check for closing costs (the downpayment is included in check) and the lender provides the remaining funds to purchase the house.
Transfer of Property
Congratulations! You now own your new home. After the meeting, the closing agent will record the mortgage and deed in your name with local government records and all funds will be disbursed.
Documents
During closing you'll sign stacks of important paperwork, including the following:
- HUD-1 Settlement Sheet - This is the itemized list of closing costs your lender gave you the day before closing. After the closing agent completes it you and the seller both sign it.
- Truth-in-Lending Statement - Given to you soon after you applied for your loan, it outlines the cost of the loan, gives you the APR (annual percentage rate) and defines the loan terms and number of payments.
- The Mortgage Note - The mortgage (or promissory) note is legal evidence of your promise to repay the loan according to the agreed terms which this document outlines.
- The Mortgage - This is the legal document that gives the lender a claim against your house if you fail to uphold the terms of the mortgage note. Although you have possession of the house the lender shares ownership until you pay off the loan, and can demand full payment or foreclosure if you default. Some states use a deed of trust instead that conveys title to a trustee until the loan is repaid.
- Affidavits - These are documents required either by the lender or the law. Your lender can explain any affidavits you're asked to sign.
- The Deed - This document transfers ownership to your name and is signed by the seller at closing. You'll get a copy at closing and the original will be sent to you after it's recorded.
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What costs will I pay at closing? |
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Closing costs vary according to lender, location and even from sale to sale. Some costs can be negotiated, reduced or even waived and some may be paid by the seller.
When you're doing your research, use this checklist to get a rough idea of what you'll pay at closing. The lender or closing agent will provide you with an exact total a day or two before closing.
Closing Costs Checklist
$________________Down payment
$________________Lender's points
$________________Prepaid interest
$________________Loan origination fee
$________________Mortgage insurance
$________________Credit reports
$________________Appraisal(s)
$________________Survey of property
$________________Inspections
$________________Homeowner's insurance
$________________Attorneys' fees
$________________Title search
$________________Title insurance
$________________Prorated property taxes
$________________Recording fees
$________________Closing taxes
$________________Escrow account for and insurance
$________________Other costs specified in purchase agreement
$________________Other costs
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Who will be at Closing? |
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The closing agent acts as our agent and will represent us at the closing. However, your personal loan processor will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees. If you have any questions that the closing agent can't answer during the closing, ask them to contact your loan processor by phone and we'll get you the answers you need - before the closing is over!
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What type of inspections do I need before I close on my home? |
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Certain inspections may be required under your particular loan program. However, depending on the home and the location, there are a variety of inspections you may want to consider before you close on your new home even if they are not required under your program, such as:
- Home Inspections
- Termite Inspection
- Water Test (for well water)
- Septic Tank Inspection
- Radon Test
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How long does it take to close my loan? |
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Shearson Mortgage can close your loan in as few as 10 days.
This is because we are a direct lender giving us control over the approval process, drawing loan documents and funding the loan.
Additionally, the third party service providers we work with, such as appraisers and title insurance companies, prioritize our orders because we provide them with a high volume of quality business.
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How can you close my loan if you are not in my area? |
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The Internet, fax machines and overnight mail services have eliminated the need for proximity to process and close a loan.
We use Shearson Mortgage preferred appraisers in your area.
On purchase transactions, we work with the local escrow company you and the seller have agreed upon. On refinance transactions, we utilize a professional signing service to bring the loan documents to your home or business for signing.
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When will I know the exact amount of money that I will need at closing? |
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Your loan processor will contact you a few days before closing to go over our final costs and to confirm your loan terms.
If you're purchasing a new home, the numbers we'll have at that point are related to your new mortgage only. Additional costs or even credits may need to be applied based on your agreement with the seller.
The closing agent, or attorney will calculate the exact amount that you'll need to bring to closing.
They'll contact you at least 24 hours prior to closing with the final figures. The funds you bring to closing must be certified form such as a bank check or money order, made payable to the closing agent or attorney.
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Will I need to have an attorney represent me at closing? |
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In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing.
In other areas, attorneys are not as common at a real estate closing.
Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage refer them to your loan advisor.
We'd be happy to provide any information necessary.
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Can I get advanced copies of the documents I will be signing at closing? |
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The most important documents you will sign at closing are the note and mortgage, sometimes called the deed of trust.
If you would like copies of the completed documents to be sent to you after they are prepared, please contact your loan advisor.
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Do I have to attend closing? What are my options? |
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It is not required that you attend the closing, if you've given an acceptable power of attorney or taken the necessary steps to complete a mail away closing.
Your loan advisor can help determine your options based on your needs.
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How soon after I sign loan documents will my loan close? |
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Typically on purchase transaction, we can close in as few as three days (one day to review the documents, one day to fund the loan, and one day for the loan to record).
On refinances, there is also a three-day rescission period that must pass before your loan can fund.
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If my loan is closing around the first of the month, should I still make my payment to my current lender? |
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We always recommend that you make your payment to avoid any late charges.
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If I am receiving cash out at the end of the transaction, how will I receive my proceeds? |
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Escrow will issue a check and mail it to you.
You can also arrange for escrow to wire the proceeds directly into your bank account.
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If I am receiving a home equity line of credit, how do I receive my draws on it? |
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You may take an initial draw at closing or you will receive a set of checks shortly after your loan closes.
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Tell me more about mortgage loan closing fees and how they are determined. |
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A home loan often involves many fees, such as the appraisal fee, title charges, closing fees and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. Shearson Mortgage takes fee quotes very seriously. We've completed the research necessary to make sure that our fee quotes are accurate to the city level - and that is no easy task!
To assist you in evaluating our fees, we've grouped them as follows:
Third Party Fees
Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.
Third party fees are fees that we'll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees.
Typically, you'll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.
Taxes and Other Unavoidables
Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don't quote you fees that include taxes and other unavoidable fees, don't assume that you won't have to pay it. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs.
Lender Fees
Fees such as discount points, document preparation fees and loan processing fees are retained by Shearson Mortgage and are used to provide you with the lowest rates possible.
This is the category of fees that you should compare very closely from lender to lender before making a decision.
Required Advances
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.
One of the more common required advances is called "per diem interest" or "interest due at closing" . All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you'll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we'll collect interest from June 15 through June 30th at closing. This also means that you won't make your first mortgage payment until August 1st. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed, it is simply a matter of when it will be collected.
If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due.
If your loan requires mortgage insurance, the first month or so of the mortgage insurance will be collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.
If your loan is a purchase, you'll also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to also be a required advance.
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How much title insurance do I need? |
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The amount of title insurance needed is based on the value of your home and the amount of your mortgage.
Lenders are covered for the full value of the mortgage.
This policy is required and will vary from state to state.
There is a one-time fee for the policy that you pay at closing.
In addition, you can obtain a separate owner's insurance policy to cover the full value of your home. However, this additional policy is not required.
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How much homeowner's insurance does a lender require? |
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Your homeowner's insurance policy must cover the cost to rebuild the home. The insured amount may be higher or lower than the actual purchase price as long as it meets the program requirements.
The insurance company you choose can give you an actual quote based on specific information about the property.
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How do I know if I need flood insurance? |
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We will perform a flood hazard determination for your property.
If your home is located in a Special Flood Hazard Area, federal law requires you to purchase flood insurance.
Most standard homeowner's insurance policies do not cover loss due to flood.
If you choose, you can obtain flood insurance coverage even if you are not required to do so by the lender.
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I've heard that some lenders require flood insurance on properties. Will you? |
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Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can't stop floods. Floods happen anytime, anywhere. But the flood disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 helps ensure that you will be protected from financial losses caused by flooding.
We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.
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What happens to my loan after it closes? |
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After your loan closes, it will be sold on the secondary market to a major investor who will assume the responsibility for servicing the loan.
Shearson Mortgage sells its loans to some of the largest mortgage investors in the country and we are confident that our mortgage investors will properly service your loan.
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Can I bring a personal check to the closing? |
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You will need a cashier's check or certified check for closing.
Since this is such a large transaction, a cashier's check provides verification that the funds are actually available.
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If I apply for a mortgage loan where will the closing take place? |
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Shearson Mortgage uses a nationwide network of closing agents and attorneys to conduct our loan closings.
We'll schedule your closing to take place in a location that is located near your home for your convenience.
We'll deliver our loan documents and wire transfer your loan funds to the closing agent or attorney at least 24 hours prior to closing so that they'll have plenty of time to prepare for your closing.
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