Top 5 Buyers items to check in the closing statement
By Elizabeth Dougherty
You found the perfect house, agreed on
a price, signed a contract, got approved for a
mortgage, had an inspection and now the only thing
between you and your new home is – the “closing”.
Before my fi rst closing, I had visions in my head
of the seller and I in the Wild West, each walking
ten paces before the bullets started fl ying. Luckily,
today’s typical closing is much more civilized.
It is little wonder that “the closing” is considered
the most stressful part of home buying. As you
sit around the closing table with your cashier’s check
in hand, the closing attorney or title agent explains
document after document after document. You sign
them all, pretending to read and understand each
and every one of them. What you really know is that
if you sign everything – the house is yours. If you
don’t sign, well, let’s not think about that, especially
since the movers are delivering your furniture tomorrow.
To avoid making a mistake, slow down!
Review ALL the documents ahead of time. RESPA
(Real Estate Settlement Procedures Act) requires that
you be allowed 24 hours prior to closing to review
all documents should you request it. By all means
– request it. Go over all of them with your lender
and agent.
The one form that summarizes the entire transaction
is the one used by almost every title company,
namely the HUD-1 Settlement Statement. If you
want a line-by-line explanation, there is one online
at http://www.alta.org/
Also, if you are from another state, you may
be surprised to fi nd out that most closings here
are done by attorneys. (Many markets like Florida,
California and Texas simply use title companies.)
Here in Alabama, the General Counsel of the State
Bar Association has issued an opinion that attorneys
must “prepare” the legal documents for closing. Title
companies may perform the actual closing, but get
used to the idea of closing with an attorney.
Below are the TOP 5 Items for a buyer to
double-check before signing:
1 Cash to/from Buyer
This lets you know EXACTLY how much
cash (usually a cashier’s check), that you will
be required to bring to closing. This could include
not just your mortgage down payment, but also
insurance premiums, prorations, appraisal fees and
more.
2 Prorations
Unless you really enjoyed the word
problems in algebra, this is one of the more
confusing line items on the closing form. The major
proration items are property tax and prepaid interest
due to your mortgage lender.
Property taxes are not paid in the beginning of
the year, but rather toward the end of the year. Once
you purchase the house, the county looks to you to
pay the property taxes. If you buy a house in July,
the seller has lived in the house for several months,
but not paid any property taxes yet, it is customary
for the seller to credit you the amount of money for
taxes for the time he or she lived in the property.
Since he or she cannot pay to the county the taxes
that are not yet due, the seller will usually simply
credit the amount of taxes that would be their
share of the total tax bill. Lee County property taxes
are due the 1st day of October each year and are
delinquent after January 1st. http://www.leeco.us/rev_com/real_property/index.html
3 Title Fees
Like all items in a real estate transaction,
title fees are negotiable. Alabama
custom is that closing fees be split between the
buyer and the seller. If the seller pays the buyer’s
title insurance fee, then they normally pick the title
company or attorney. Make sure that the other fees
to be charged to you are competitive, like attorney’s
fee, doc prep fee, title exam fee and more.
4 Lenders Fee
If you have a great Lender, they will
have already gone over the fees with you.
5 POC Items
Paid outside of closing. Many times you
will pay certain items before closing, like the
appraisal, home inspection, or termite inspection.
While these items may be listed on the HUD, they
are paid before closing. They should not be added
into your bottom line total. Bring receipts to closing
to avoid being double-charged.
My last bit of advice is to relax and leave your
spurs at home. After closing, celebrate!
Elizabeth Dougherty, a resident of
Auburn, is a former Real Estate Broker
and Mortage Broker. She can be
reached at EADougherty1@aol.com.
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