The closing is the final step in which the home is transferred to you. Once your loan is approved, a closing date is set. Depending on the laws of your state, the closing may be conducted by either:
- Your lender
- A title insurance or escrow company
- Your real estate broker
- An attorney who represents either you or the seller
The purpose of the closing is to make sure the property is ready to be transferred to you from the seller. To ensure that the transfer can be made, the lender normally prepares the following items ahead of time:
Title search and report. Research of land records, court records and other legal documents to determine if the seller has a clear, marketable title to transfer to you.
Title insurance binder. Indicates the result of the title search and assures the lender the title to the property qualifies for a title insurance policy.
Survey. Confirms the property boundaries are as described in the purchase and sale agreement. (A survey is not required in all states.)
Termite, well, sewer or septic certificate. Certifies that the sewage and water supply work properly and that the property is free of termites and/or other wood destroying insects. The sales contract will state whether you or the seller is responsible for these inspections and certificates.
Title insurance. Title insurance protects your lender against losses that may be incurred because of a defect in the title, a forgery, a recording error, claims of undisclosed or unknown spouses or heirs, and other risks that did not appear in the public records when the title search was done.
Hazard insurance. Hazard insurance (also referred to as a "homeowner's policy") protects you and the lender from loss in the event the home is damaged or destroyed by fire, storm or other hazards. You are responsible for obtaining hazard insurance prior to closing and for providing proof of insurance to your lender. The lender may also require additional insurance against loss by flood or earthquake.
Several other documents must be prepared by the lender before the closing:
HUD 1 settlement statement. An itemized list of the credits and charges, for both you and the seller, based on the contract terms.
Loan documents. Final loan documents that grant your lender a lien against the property in order to secure the repayment of your loan. These documents include a promissory note, which is your legal pro