How much money should I plan to take to settlement?

Pennies It’s difficult for anyone to say exactly how much money you will have to take to settlement, because some expenses are pro-rated right up to closing. Federally-required settlement-cost estimates help, but they are only best guesses. It’s wise to be prepared for some unexpected closing costs. Some of the expenses typically paid at settlement are:

  • Prepayments of related costs, such as a year of hazard insurance and several months advance on property taxes. Rather than closing fees, these are escrow items required by many lenders.
  • Points and interest rate, which are the most variable expenses, and could change on the morning of settlement unless the buyer has a locked-in loan rate.
  • Interest on the loan, property taxes, homeowner association dues, and other costs the homeowner normally prepays or pays on a set schedule. A change in settlement date can dramatically alter the amount due on these items.
  • The cost of title insurance is another expense paid at closing. Often, purchasers are given the option to buy a piggyback policy that protects them, just as the mandatory policy protects the lender's claim in case of a dispute over title. The cost to the buyer is not usually listed on pre-settlement estimates, but is generally paid at closing.

Some of the items listed on settlement sheets may have already been paid, such as credit report fees, loan origination fees, survey of the property, etc.

Once set, are settlement dates irrevocable?

Jester No. On the contrary, flexibility is a must when it comes to the settlement date. An offer to purchase a home typically includes a settlement date. The settlement is the day the seller receives the funds from the buyer and the buyer gets proof of ownership. While we do our best to estimate a settlement date, it is important to remember many things can crop up to delay the settlement. For example:

  • Problems with buyer's credit history that must be explained.
  • Unforeseen delays in processing lending paperwork.
  • Delays in property's appraisal.
  • Inspections and/or repairs that must be completed before settlement.
  • Liens against the property that need to be resolved.
  • Personal problems (such as a death in the family) that lead to rescheduling.

Be flexible

Remember, delays in settlement do not necessarily mean the transaction is falling apart. Most transactions do eventually go to settlement. Many problems can be straightened out in a day or so. The key is flexibility.

We can work with you to complete the purchase of your new home with a minimum of hassle. Call or e-mail us with your questions now.

What can I do to prepare for a smooth settlement?

Notebook Once you’ve decided on a new home and signed the sales contract, numerous details need attention before settlement. Here is a checklist to help you get ready.

Before Settlement:

  • Choose an experienced and well-recommended settlement agent as soon as possible, and give their name to your agent. Find out about fees and overall closing expenses;
  • Convey a copy of the contract and the names of all parties involved in the sale/purchase to the settlement agent;
  • Check back to be sure the settlement agent orders a title examination, title insurance for the lender, survey of the property, and payoff notice of the seller's mortgage. Also be certain the seller has provided pest and any other needed inspections.
  • Obtain from the settlement agent settlement-cost estimates, including pro-rated homeowner dues, utilities, etc.
  • Provide the settlement agent with a paid receipt for a one-year hazard insurance policy, and get an estimate of cash needed at closing.
  • Make a walk-through inspection of the property and notify the settlement agent if there are any major problems.

At Settlement:

  • Review all documents and sign. You'd be wise to buy homeowners title insurance.

After Settlement:

  • Receive recorded deed and title insurance policy, if bought.

What are my responsibilities before closing, and what are the seller’s responsibilities?

Handshake Once you’ve signed a contract to buy or sell a house, the preparation for settlement begins. Settlement, or closing escrow, is the process of transferring the title (ownership) of the home from seller to buyer.

Often, the real estate agents involved in the sale help take care of these arrangements. But the buyer and seller are ultimately responsible for attending to these details. Here are the basics:

Buyer’s Responsibilities

  • The buyer must first secure the financing to buy the house. Usually this means taking out a mortgage loan. Most lenders require a complete financial picture, including income and expenses, and a credit check. In addition, most lenders want an up-to-date appraisal of the home, a survey of the property and, often, some inspections (for termites, radon gas, etc.). Some lenders specify which service providers they want the borrower to use. Once all the paperwork is in, the borrower should keep in touch with the lender until receiving a loan commitment.
  • The buyer needs to purchase a hazard insurance policy in advance for the new home. The buyer is also required to purchase title insurance policy – usually at settlement – to protect the lender. If the buyer wishes to bring an attorney to settlement, arrangements should be made 30 to 60 days in advance.
  • A few days before settlement, the buyer should receive a Good Faith Estimate of settlement costs. In addition to the loan commitment letter, the buyer must bring a certified or cashier’s check for the down payment and any other costs due at settlement. Also bring your checkbook in case there are any miscellaneous costs. These costs include mortgage interest from the closing date to the first payment due, escrow for property taxes and insurance, and various taxes and recording fees.

Seller’s Responsibilities

  • The seller usually designates the settlement agent, usually 30 to 60 days before closing. The seller also makes arrangements with designated services for inspections and appraisals and provides needed paperwork such as a housing plat, previous title insurance information and any prior inspections.
  • The seller also needs to check with their lender to get up-to-date figures for the payoff of the mortgage, and to learn if any rebates are due for pre-paid taxes or insurance.

Mutual Responsibilities:

  • Both the buyer and seller need to give the settlement agent all pertinent information requested. And, since many long and detailed forms are usually signed at settlement, both might consider requesting copies of the basic settlement forms several days in advance to review them. The focus at the settlement table is on checking the exact figures to be sure they are accurate.
  • If either the buyers or sellers cannot come to closing, they should notify the settlement agent in advance so a Power of Attorney can be prepared.
  • Once all the papers are signed and money is paid, the seller hands the keys over to the buyer and the sale is complete.

What are the ways to hold title to a property?

Quill w/Paper There are four basic types of titles to real estate:

  • Tenants by entirety This is the most common form used by married couples to hold title to their home. Each partner owns an equal, undivided interest in the whole property. When one person dies, the spouse gets the title to the whole property automatically.
  • Joint tenants This title is similar to the first, but is used more frequently for two or more unmarried people. Each owns an equal, undivided interest in the property and with the right of survivorship, when one owner dies, the title automatically goes to the survivor or survivors.
  • Tenants in common This form is used more for investment ownership in property. Each shares ownership of the whole property, but when one partner dies, the deceased’s share passes according to the owner's will.
  • Individual ownership One person owns the entire property, which, upon death, passes according to the instructions in their will.

Why do lenders want a survey before settlement?

Survey Most lenders require a survey of the property before settlement. A survey checks the boundary lines, determines whether the house is within the borders, looks for encroachments and determines if any easements affect legal title.

Costs of a survey, typically paid by the seller, can vary. Sometimes an old survey can be updated for a lower cost. Having a surveyor plant stakes on corners of the lot is usually an extra cost.

We’re experts in the fields of real estate and homeownership. Put our expertise to work for you by calling or e-mailing us today.