What actually happens at a real estate closing?

You found the perfect Massachusetts home. You made an offer to purchase it. The seller accepted your offer. Now all you need to do is close the deal. That is what a real estate closing is, the meeting at which the property legally transfers from the seller to you. It is the final step in your home purchase process.

Be prepared to sign numerous documents at your closing. Other things, too, will occur, including the following:

  • You will give a cashier’s check to your escrow agent for the amount of your closing costs.
  • Your mortgage lender will give your escrow agent a check for the amount of your mortgage if it has not already done so.
  • Your escrow agent will give the seller a check for the amount to which (s)he is entitled.
  • The seller will sign the property deed giving you title to your new home and also will give you the keys to it if you do not already have them.
  • The title company will take the deed so it can be properly registered before you get it back.

Closing costs

Usually you have at least 30 days between the time you make your purchase offer and the time you close. A lot happens during this escrow period and you accumulate various fees for the work that others do as part of a residential sale. These fees are your closing costs, which you can expect to amount to at least 3 percent of your mortgage loan.

By law, your mortgage lender must give you an estimate of these costs, called a Good Faith Estimate, within three days after you apply for your mortgage. It then must give you a subsequent document, called a HUD-1 Settlement Statement, several days prior to your closing that tells you the exact amount of your closing costs. This is the amount you must pay by cashier’s check at your closing.

Cash reserves

Most lenders require that you have additional money in the bank over and above your down payment and closing costs. Called your cash reserves, this amount proves to your mortgage lender that you have sufficient funds to pay your mortgage. Some lenders require that you have enough in the bank to cover your first mortgage payment, but others require that you have enough to cover as many as six mortgage payments. When you are shopping for your mortgage, be sure to ask each potential lender about its cash reserves requirements.

Buying a new home is one of the most exciting events in your life. It also can cause you and your family a lot of stress as you work your way through the process. Nevertheless, when you walk out of your closing with keys in hand, it will all be worth it.

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