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Closing the Deal
Closing is the last step in buying a home. Unless you are paying cash for the
house, you cannot buy without backing from a lender, which comes in the form of
a commitment letter. The lender will require that you have a homeowner's
insurance policy on the property, so you will need to arrange this before the
closing.
At closing you will be asked how you want to hold the title, which basically
refers to ownership. If you alone will own the house, its sole ownership; joint
tenancy applies when two or more people are purchasing, but each holds the
right to dispose of his or her share. Tenancy in common applies when the
property is owned jointly with an agreement that if one owner dies, the share
goes to his or her heirs. Tenancy by entirety is only an option for married
couples who will make joint financial decisions and, if one spouse dies, the
property is inherited automatically by the survivor.
The down payment is due at closing and must be provided in the form of a
cashier's check. Usually there's already a deposit on the house being held in
escrow by the real estate agent; the deposit is produced at closing and
included in the down payment.
Closing costs are an aggregate of itty-bitty administrative fees incurred
behind the scenes to process the loan, the appraisal, the title search, and so
on. These many individual costs add up, but they are also beyond your control,
so it's really a matter of accepting the inevitable early on. When you first
apply for a loan, the lender is required by law to give you a Truth-in-Lending
estimate of what the closing costs will be.
Costs payable in connection with the loan alone include points, loan
origination fee, assumption fee, application fee, credit report, appraisal fee,
home inspection fee, and processing fee. Depending on the loan package you
select, you may not have to pay points. Consider that one point is equal to
about 1 percent of the loan amount. This is negotiated when you decide on a
lender.
The main purpose of closing is to review and sign all appropriate documents.
While it is essential that you understand everything you sign, it's not
feasible to read through the volume of documents put before you on the actual
day. Whenever possible, try to get documents you will be signing ahead of time
so you can review them. This way, you can get your questions answered before
you sign.
After all signatures are on the dotted lines and the money
is transferred to the proper accounts, you are finally the proud owner of a
home. Many buyers make the mistake of thinking they can move out of the old and
into the new on a very tight schedule. It's far wiser to give yourself a five-
to seven-day overlap in case loan closing gets delayed or the seller doesn't
meet the deadline. In the long run, paying a little extra rent is not nearly as
expensive as holding up moving trucks and camping in hotels. Plus, you'll have
that added peace of mind at a very nerve-wracking time.
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