What Documents To Review At A Closing For A Mortgage

What Documents To Review At A Closing For A Mortgage

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What Documents To Review At A Closing For A Mortgage

Three important mortgage documents
1.     Mortgage
2.     Note
3.     HUD-1 Settlement Statement

Mortgage
•     People who sign only have an interest in the property and our not responsible to pay for the loan
•     Make sure the correct legal description and address are listed
•     Gives the rights of the mortgage company
o     Usually very standard
•     Secures the note
•     Gives the lender a claim against the home if you fail to live up to the terms of the loan

Note
•     Those who sign the note are responsible for paying the mortgage and their credit will be effected (positively and/or negatively) by the loan
•     States the interest rate
o     Fixed
o     ARM loan and how often the interest rate will change
•     States the loan term
o     How many years the loan is
o     A prepayment penalty will be listed if applicable
•     States the late charge amount
o     A percentage of the principal and interest
•     States the principal and interest of the payment
o     The escrow amount is not stated
•     States the payment is due
o     Check with the lender if there is a grace period
•     States the loan amount
•     Promise to repay the mortgage
•     States what the lender can do if you fail to make payments

HUD-1 Settlement Statement
•     A detailed list of all costs related to the sale of the home
•     A precise record of the settlement costs
•     Both buyer and seller sign



Helpful Tips
•     Have an attorney present that represents you and you only
•     You have a three day rescission period
•     Review sections 900 and 1000 of the HUD statement if you sign for an escrow
•     At closing you have the opportunity to make last minute changes
•     Bring any documents that you previously received to the closing and refer to the documents at closing
•     Check to see if there are any back taxes on the property
o     Once you sign off on property those taxes are your responsibility


Explanation of the HUD-1 Statement

BUYER’S RECAP

Line 101 is for purchases, purchase price would go here.

Line 102 is for any personal property that is included with sale on purchases only.

Line 103 is Total for Page

Line 104 and 105 are for Mortgage Payoffs.

Lines 106 thru 112 are items that buyer has agreed to pay for in advance.

Line 120 is the total of all charges to buyer.

Line 201 is money deposit given by buyer

Line 202 is new loan amount

Line 203 is for existing loans buyer will assume or pay to seller.

Line 204 thru 209 is for misc. credits to buyer as agreed to up-front.

Lines 210 thru 219 are for credits to buyer from seller for taxes, etc.

Line 220 is total credits to buyer

Line 303 is difference due to or from buyer.

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SELLER’S RECAP

Line 400 and or 401 is the Purchase Price of Property

Line 402 is due seller for any personal property sold to buyer

Lines 403 to 405 are for misc. credits to Seller

Lines 406 and 407 are for taxes to be paid by Seller. These taxes are charged to buyer on Page Two of the HUD1, but then immediately credited back to buyer on Page 1 and charged to Seller on Page 1 on Lines 406 and 407 as stated above.

Lines 410 through 412 are deductions to seller that will be credited to buyer on lines 204 through 209 of the HUD 1 as explained above.

Line 420 is the Total due Seller minus any charges he is crediting buyer as explained above.

Line 501 is a deduction in Seller’s total for any deposit he received upfront.

Line 502 is the deduction for total Settlement Charges as carried over from

Lines 503 through 509 are a deduction for any mortgages or liens the Seller owes on the property.

Lines 510 to 515 are for any taxes or assessments currently due on the property and are deducted from Seller’s total due.

Lines 520 is the Total Deduction Amount for Seller

Line 601 is the Total Amount Due Seller at Closing

Section 700 of the HUD only refers to purchases. It describes all commissions paid to Realtors. Commissions are paid according to whatever the buyer and seller agree to in the purchase contract.

Section 800 of the HUD refers to fees charged by the Lender and Mortgage Broker providing financing for the property, if any.

Line 801 is Loan Origination Fee. This is the fee your broker will charge for gathering all your data needed to quality for the loan. He/she will submit all of the data to various lenders trying to find the best loan for you. He/she will then explain to you all of the terms of your loan, such as your interest rate and monthly payment.

Line 802 is Discount Points. This is a voluntary fee. If your lender has approved you for an 8% interest rate, you can "buy it down" to 7% by paying 1% to 2% of the loan amount upfront. Your monthly payment would then be lower per month. This is strictly up to you if you want to pay these points to get a lower payment. Some lenders do not offer this alternative.

Line 803 is Appraisal. An appraisal is a written report from a qualified appraiser of the estimated fair market value of the home you are purchasing or refinancing. An appraiser gathers information on recent sales of homes located within a .5 mile radius of the subject property. He then uses this information to arrive at the fair market value. The lender needs to know how much the property is worth if they are going to lend you money. The appraised market value must be at least 20% over the amount of money you are borrowing to purchase the home. An appraisal costs anywhere from $250.00 to $500.00.

Line 804 is Credit report. A history of how you pay your bills. The lender needs to be sure you have established a pattern of paying your debts on time. If they are going to loan you a large amount of money, they need to feel confident that you are responsible enough to pay them back in a timely manner. The charge for a credit report can be anywhere from $25.00 to $50.00 and the service is provided by the Credit Report Agency in your region.

Line 805 is Lender’s Inspection Fee: Usually charged on new builds. An inspector will visit the property to make sure the home is thoroughly finished and ready for occupancy. The charge for this is around $100.00.

Line 806 is a Mortgage insurance application fee. Mortgage insurance is the same thing as PMI. If the borrower has less than less than 20% equity in house, then it will be charged. It is a monthly fee based on the loan amount and will not be charged once the borrower pays the balance down on the loan.

Line 807 - You will never use this

Line 808 - Tax Service Fee. An auditor at the bank will verify with the IRS that the tax information you provided to qualify for the loan is not fraudulent. The cost for this fee is $60.00 to $80.00.

Line 809 — Flood Certification. Lender will verify if borrower’s property is or is not in flood zone with a flood certification company.

Line 810 - Courier Fees. These fees such as FEDERAL EXPRESS, are charged sometimes when documents need to reach all parties quickly and US Mail would not accommodate the time schedule. These are the courier fees incurred by the Lender or Mortgage Broker only and will not include any other courier fees incurred by the Title Agent.

Line 811 - Underwriting Fee. This is the service provided by an Underwriter at the leading institution that will evaluate all of your data, and all of the data provided by the required sources. They will then determine if you qualify for the amount of funds requested, and they are the final authority to approve your loan.

Line 812 - Processing Fee. Usually to Broker or Lender for processing paperwork needed for the loan.

Line 813 - Yield Spread. This fee is paid by Lender to broker, AND IS NOT CHARGED TO CUSTOMER. It is shown only on HUD as required by law and is placed outside the buyer’s and seller’s fee columns, to the left.

Line 814 Commitment Fee. This is the fee the underwriter will charge for approving the loan in writing.

The 900 Section of the HUD1 is for Interest and Escrows

Line 901. Interest. This is usually charged from the day of funding of the loan to the beginning of the next month. Interest for the following month will be collected when borrower makes first payment. Interest is always paid 30 days in the rear.

Line 902 and 903 — Insurance Premiums. Insurance premiums that are due for a full year at the time of closing. The lender will require you to buy a homeowners insurance policy which will protect you from flood damage, fire, etc.

Line 1001 Homeowner’s Insurance Escrow. Even though you may pay a full year’s premium up front for your homeowner’s policy, the lender may require you to make monthly payments on your next year’s premium which will be held in escrow until due. Since your payments may not begin for awhile after closing, the lender may require a couple of months payment up front at closing.

Line 1004 Property Tax Escrow. Even though the taxes may be paid in full at closing by the seller, the lender may require you to make monthly payments on your next year’s taxes which will be held in escrow until due. Since your payments may not begin for awhile after closing, the lender may require a couple of months payment up front at closing.

Line 1009 Aggregate Adjustment. A credit to borrower for insurance and tax escrow funds that exceed Fannie Mae guidelines.

Lines 1101 Settlement Fee. When all the requirements of the lender have been met and your loan has final approval, an appointment will be made for you to sign all the necessary paperwork, such as Note, Mortgage, etc. A closing agent of your choice will be appointed to explain all of these documents to you as you sign them. A closing agent is an expert in the field that can answer any questions you have about your loan for your new home.

Lines 1102 - Title Search and Examination. This service is also provided by the Title Company and relates specifically to the insurance policy, just like a medical insurance company would not insure a preexisting condition, a title insurance company would not insure a piece of property with known title defects. Therefore, a search of the public records at the courthouse is made regarding the subject property. The courthouse holds all records relating to land. Any defects found on your subject property will then be corrected by the title company and an insurance policy would then be issued.

Line 1103 - Same as Title Search and Examination above

Line 1104 - Binder (Commitment) Fee. A written report/promise to insure the title examination as explained above and a commitment to insure the property as shown therein.

Line 1105 - Document Prep. For any legal document preparation needed to close such as the General Warranty Deed.

Line 1106 - Notary fees. Most Settlement Agents are also Notary Publics and include this fee in the Settlement fee as explained above in line 1101, however, you may have pay an outside Notary Public depending on who is performing your closing.

Line 1107 Attorney’s Fees. Sometimes the use of a Real Estate Attorney is required by one of the parties involved in the closing.

Line 1108 1109 and 1110 - Title Insurance:

Line 1111 — Any Endorsements to the Insurance Policy as explained above.

Line 1113 — Courier Fees. These fees such as FEDERAL EXPRESS, are charged sometimes when documents need to reach all parties quickly and US Mail would not accommodate the time schedule. These are the courier fees incurred by the Title Agent only and will not include any other courier fees incurred by the Lender or Broker.

1201 - Recording fees. The new Deed and/or Mortgage are required by the Title Agent to be filed with the county recorder. These fees are referred to as "filing fees" as well.

1204 - Conveyance Fee. This is a tax charged by the county on the sale of the property. It is based on purchase price.

1301 - Survey: A detailed check of the public records and your "legal description" of the property. The survey will let the lender know the structures on your property are not overlapping on your neighbor's property and/or there aren't any encroachments, such as your garage being located on your neighbor's property. If there are encroachment problems, the lender would be at risk if your neighbor decided they wanted to take you to court and try to have the garage moved. This service is performed by a Surveyor of your choice and usually cost around $200.00 to $400.00.

Line 1302 - Inspections. Pest Inspection, Gas line inspections which are performed for purchases only and are mandatory by lenders.
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