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Closing Table

You have found your dream house. Made an offer, came to terms, got through inspection.  Finalized the loan and have prepared to move. Once all that is done, there’s nothing left but the final – and crucial – hour. The closing.

So what happens at this mysterious event we call “THE CLOSING”?  Many buyers are intimidated by the closing, particularly since it takes place in a lawyer’s office and involves signing page after page of legal documents. Enough to give anyone a headache.

But really, truly, you as a buyer should take a deep breath, relax, and ENJOY the closing.  Enjoy the free soft drinks and chocolate provided by the closing attorney.  Quiz the sellers about the neighbors and nearby stores and what they will miss most about the house. Laugh with your Realtor about the homes you saw that were awful (“remember that bright orange kitchen in that one house?”). Shake hands with your lender.

You can RELAX, because at this point if your Realtor and lender have done their jobs, the hard work is all done.

The closing attorney works for the lender. As a practical matter, the lender’s interests are aligned with yours, as the buyer. The closing attorney, weeks prior to the closing, ordered a TITLE SEARCH. A title search is a canvassing of the relevant county records to make sure that the seller owns the property and that there are no “liens” or claims against the property. If there are any liens, the closing attorney’s job is to clear those liens so that you are getting title to property clear and free of anyone else’s claims against it.

You don’t have to worry about any of this – because as the representative of the lender, the closing attorney has already cleared title. Pursuant to the Georgia contract, the Seller must convey clear title.  So if you’re sitting at the closing attorney’s table, title is clear. (If it’s not, the closing attorney will let all parties know and the deal will not close as scheduled until title IS clear; but typically if there is a problem you will know well in advance of the scheduled closing).

The closing attorney will first present all parties with a CLOSING STATEMENT – also known as a HUD Settlement Statement, or simply “HUD STATEMENT”.  HUD stands for Housing and Urban Development – the federal agency which mandates the form.  This and the note are the two most important documents in the closing – most if not all of the other forms are simply form documents that everyone must sign and which are the same in every closing. The HUD statement and the note are unique to you.

This is where your Realtor comes in – the Realtor represents YOU in the closing.  It’s our job to make sure the closing statement accurately reflects the financial deal between the parties.  It is a smart thing to provide your Realtor, also, with the Good Faith Estimate previously provided to you by your Lender.  The closing statement should reflect the charges in the GFE very closely (the margin of variance allowed is prescribed by law, and the closing attorney will go through with you any variance between the estimate and the actual statement).

We will check the other key document – the Note – to be sure it accurately reflects the amount of the loan, the term, the interest rate, and other terms of the loan.

There are many other pages of documents for you to sign – the Security Deed, the Truth in Lending Statement, a copy of your loan application. Most, again, are form documents – but the Truth in Lending Statement (or TIL) is worth some extra explanation here.

The TIL shows what you will pay in total over the life of the loan – adding principal and interest over the thirty years of a loan (or fifteen, if you have a fifteen year loan). It also shows a percentage – but this is very confusing.  It is NOT your interest rate. Throws buyers off all the time. It actually is your interest rate PLUS your closing costs, even if all or part of the closing costs are being paid by the Seller. Meant to be a helpful document, it’s really not. The most important thing for you to know about the TIL is that it’s not important – it’s simply for your information but must be signed. The Note and the HUD Statement govern – and they show your costs and your interest rate in a more easily understood manner.

Once you’ve signed all those documents, handed over the money you’re to bring to closing (which must be either wired or brought as certified funds), checks are cut, keys are handed over, and you own a new home!  It may seem a little anti-climatic at the time. But there’s always a big sense of relief and joy. Congratulations on your new home!