Don’t assume that once your final underwriting approval is in, you’re totally off the hook. Underwriting continues up until the time the deed has recorded. As I’ve stated before, many lenders, for example, will verify your employment on the day they fund the loan, or the morning the escrow agent plans to go record the deed in your name!
Ironically, after all you’ve gone through to get the house, if all goes well it will close with a whimper, not a bang. I recently sold a home to a woman who hadn’t bought real estate in over 20 years. The sellers signed at home the night before she and I went to the title company for her signing appointment. I explained that the mortgage would fund the next day, and that the day after that the sale would close. The seller would leave all the keys and garage door opener on the counter, and I would access the front door using the lockbox, which the listing agent would later remove.
Well, my client was sorely disappointed at how anti-climatic her closing was. In her imagination, she pictured a momentous event with both parties, both agents, and some other distinguished-looking folk all dressed to the nines, and seated around a mahogany table in a mahogany paneled room. After everything was signed, a trumpet blast would sound and the Handing Over of the Key would take place.
In real life, any celebratory climax around closing escrow is something you’ll have to create by going out to dinner or having a housewarming soiree.
Closing can be around-the-conference-room-table formal or around-your-dining-room-table informal, as the circumstances of your case and the standard practices in your area require. Your escrow agent will drive this phase, keeping your Realtor constantly apprised of any and everything that is required of you. One day during the last week of your escrow, you will be asked to sign the final documents. Ideally the signing will take place at the escrow agent’s office, but you may request to do it at your home or office with a mobile loan signer, who is also a notary public in your state. At this signing, you will sign a huge stack of documents:
° Title documents, which allow the property to be placed in your name on the public records and which secure your mortgage lender’s interest in your property (e.g., the grant deed from the seller and the deed of trust you sign for the benefit of your lender). These make up a small fraction of your closing documents;
° Loan documents, which set forth every last detail of your mortgage loan, and constitute your agreement to repay the lender and the lender’s various legal and corporate disclosures to you (e.g., the note which evidences your agreement to repay the lender); and
° Escrow documents, which constitute your final authorization of the escrow or closing agent’s disbursement of all the money and property in your escrow account (e.g., your settlement statement or HUD-1).
Most of these items vary dramatically state-by-state, county-by-county, lender-by-lender, and even transaction-by-transaction. However, there is one important element of closing that has been standardized nationwide—your closing, or settlement, statement. The federal Department of Housing and Urban Development has created a standard form, called the HUD-1 (check out a sample HUD-1 on www.REThinkRealEstate.com by going on our blog and typing keyword “HUD1” into the Tara’s Tips box), for use by closing agents everywhere in disclosing to buyers and sellers in line item format:
° All the debits to both Buyer and Seller, including every penny of closing costs;
° All the credits to both Buyer and Seller;
° All deposits that have been made to the escrow account; and
° All monies which must still come in to close the transaction.
At closing, you will receive a preliminary or proposed HUD-1 statement, because some items, like property tax prorations or prepaid interest, cannot be determined definitively until the day of closing. This is because if the lender funds the loan a day early or a day late, these amounts will change. Usually, the closing agent will very slightly overestimate the cash you need to bring in to close, so that they don’t have to ask you to come back in with a cashier’s check for $13.25 before your deed can be recorded. Your final HUD-1 will be sent out the day of closing, and often a week or so later you will receive a refund check with the overage left in the escrow account, if any. This final HUD-1 will do double duty as a tax document the following January 1; mortgage discount points and pre-paid interest are fully tax deductible (in addition to your regular monthly mortgage interest) for the year in which you paid them. Don’t forget to give your tax preparer your HUD-1 with your W-2’s or 1099’s the next year!
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