February 15th, 2016 by homeownershipmatters.realtor Editor
Congratulations, you found a mortgage that works for your household! But before you celebrate your new loan there are a few more steps to take in the process. The following excerpt from the Consumer Financial Protection Bureau’s Home Loan Toolkit may help. The complete toolkit, including financial worksheets and valuable tips, is available as a download.
Step 1 – Shop For Mortgage Closing Services
Once you’ve decided to move forward with a lender based on the Loan Estimate, you are ready to shop for the closing agent who gathers all the legal documents, closes the loan, and handles the money involved in your purchase.
After you apply for a loan, your lender gives you a list of companies that provide closing services. You may want to use one of the companies on the list. Or, you may be able to choose companies that are not on the list if your lender agrees to work with your choice. The seller cannot require you to buy a title insurance policy from a particular title company.
- Closing agent: In most of the country, a settlement agent does your closing. In other states, particularly several states in the West, the person is known as an escrow agent. And in some states, particularly in the Northeast and South, an attorney may be required.
- Title insurance: When you purchase your home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title,” to the home to you. Title insurance can provide protection if someone later sues and says they have a claim against the home.
Learn more about title insurance and how requirements may vary by state.
- Home inspector: When you are considering buying a home, it is smart to check it out carefully to see if it is in good condition. The person who does this for you is called a home inspector. The inspector works for you and should tell you whether the home you want to buy is in good condition and whether you are buying a “money pit” of expensive repairs. Get your inspection before you are finally committed to buy the home.
- Home appraiser: A home appraiser is different from a home inspector. The appraiser is an independent professional whose job is to give the lender an estimate of the home’s market value. You are entitled to a copy of the appraisal prior to your closing. This allows you to see how the price you agreed to pay compares to similar and recent property sales in your area.
Step 2 – Review Your Revised Loan Estimate
When important information changes, your lender is required to give you a new Loan Estimate that shows your new loan offer. It is illegal for a lender to quote you low fees and costs for its services on your Loan Estimate and then surprise you with much higher costs in a revised Loan Estimate or Closing Disclosure.
However, a lender may change the fees it quotes you for its services if the facts on your application were wrong or changed, you asked for a change, your lender found you did not qualify for the original loan offer, or your Loan Estimate expired.
Learn why your loan estimate might change and how to talk with your broker about it.
Step 3 – How To Understand and Use Your Closing Disclosure
You’ve chosen a home you want to buy and your offer has been accepted. You’ve also applied for and been approved for a mortgage. Now you are ready to take legal possession of the home and promise to repay your loan.
At least three days before your closing, you should get your official Closing Disclosure, which is a five-page document that gives you more details about your loan, its key terms, and how much you are paying in fees and other costs to get your mortgage and buy your home.
Learn how closing costs are set and see a sample closing document that breaks down all the costs for you.
A Pause Before Closing
You’ve spent time understanding what you need to do and what you need to pay, as a new homeowner. Now is the time to step back and feel sure you want to proceed with the loan.
If you are not comfortable with your mortgage and your responsibility to make payments, you might not be able to keep your home. If you’ve made a careful decision about what you can afford and the mortgage you wanted, you will be able to balance owning your home and meeting your other financial goals.
The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.
