Many people enter the purchase of a home process with both excitement and trepidation. It is helpful and reassuring to know what to expect as go through the process in terms of expenses and the process.
What is Included in the Closing Cost
Closing costs generally cover the following services:
- Attorney’s fees (yours and your lender’s if applicable)
- Title insurance (yours and lender’s)
- Property taxes (to cover tax period to date)
- Interest (from date of closing to 30 days before the first monthly payment)
- Loan origination fee ( this covers lenders administrative cost)
- Recording fees
- Survey fee
- First premium of mortgage insurance (if applicable)
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner’s insurance policy (fire and flood insurance if applicable)
- Documentation preparation fees
Good Faith Estimate
A good faith estimate lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. The lender must provide this estimate within three days of your application so that you are fully informed in shopping for a loan.
Real Estate Settlement Procedures Act (RESPA)
RESPA stands for Real Estate Settlement Procedures Act. This act protects borrowers from abuses by lending institutions. RESPA requires lenders to disclose information to potential customers throughout the mortgage process. The act mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices, and the nature of business relationships between closing service providers and other parties to the transaction.
What to Expect On Closing Day
You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then provide a statement listing the amount of money you owe the seller (cost of the home, remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide documentation of any inspection, warranties, etc.
It is important that you fully understand all the documentation before you sign the mortgage, agreeing that if you don’t make payments, the lender is entitled to sell your property and apply the sale price against amounts you owed plus expenses. You will also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
You’ll pay the lender’s agent all closing costs and he/she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the Massachusetts Registry of Deeds in the County where the home is located. And then you will be a homeowner.
What You Get at the Closing
- Settlement Statement
- Truth-in-Lending Statement
- Mortgage and Deed
- Mortgage Note
- The Keys to The Home
There are many important steps in the process of transferring property from one party to another. It is important to have good communication with closing attorneys to ensure a smooth closing. In many cases, a lender will allow a buyer to choose a closing attorney for their home purchase. Please contact John Tramontozzi at Tramontozzi Law if you would like assistance with your Massachusetts home purchase and closing.