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What is a closing?
Is an attorney required to close a loan?
What is a termite inspection?
Is a home inspection the same as a termite inspection?
What is a dye test and do I need it?
What is a survey or Plot Plan?
What is a HUD-1?
What is prepaid interest?
What is proration of property taxes?
What is the annual percentage rate?
Why is the annual percentage rate different from the interest rate?
Why is the payoff on the old loan higher than the principal balance?
What is a closing?
In some areas this is called a "settlement". The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details are handled.
Is an attorney required to close a loan?
Yes and No, while some states require a closing to be handled by an attorney others do not. Such states may allow a closing to be facilitated by a settlement agent. A settlement agent is a skilled professional regarding the closing process, however an attorney may still be used if desired. The following states require an attorney to close: CT, DE, GA, KY, MA, NC, SC.
What is a termite inspection?
In many areas of the country, the property must be inspected for termites and the inspection is required in the purchase contract. In some parts of the country, this may be called a "wood infestation" report. The report is required on all FHA and VA loans as well as many conventional loans.
Is a home inspection the same as a termite inspection?
No, while the termite inspection is performed to detect any wood infestations, a home inspection is performed on the dwelling itself. Some of the things examined in a home inspection are the furnace, hot water tank, and the roof.
What is a dye test and do I need it?
A dye test is performed by a certified plumber, where a dye is poured into the downspouts of the home and is tracked to see where it comes out. This test insures the rain water off of the home is not going into the community's sewage system. The need for this test is determined by local community requirements.
What is a survey or Plot Plan?
The lender may require a survey of the property, showing the property boundaries, the location of the improvements (buildings), any easements for utilities or street right-of-way and any encroachments on the boundaries by fences or buildings. Encroachments can be minor, such as a fence, or may be serious and have to be corrected before the closing. In some areas, an addendum to the title policy eliminates the need for a survey.
What is a HUD-1?
Also called a settlement statement, the HUD-1 or HUD-1A is a summary of the financial portion of the real estate transaction. Think of it as the financial picture of the closing: all money flowing into or out of settlement appears on the form. The HUD will list the purchase price, loan amount, closing costs for both buyer and seller, and show all prorations and sums being disbursed by the settlement agent to all parties. It also clearly summarizes the total cash due from the buyer.
What is prepaid interest?
This is the odd days' interest which the buyer/borrower must pay from the time a loan closes to the first day of the following month. This is a settlement charge and is shown on the HUD-1.
What is proration of property taxes?
This is the process of charging either the buyer or the seller for their share of property taxes for their respective time of ownership.
What is the annual percentage rate?
The annual percentage rate (APR) is the total cost of credit expressed as an annual rate. Because a borrower may be paying loan discount "points" and other "prepaid" finance charges at closing, the APR disclosed is often higher than the actual interest rate on the loan.
Why is the annual percentage rate different from the interest rate?
The APR is computed from the amount financed and based on what the proposed payments will be on the actual loan amount credited at settlement.
Why is the payoff on the old loan higher than the principal balance?
The borrower may have an escrow shortage with the current lender, which needs to be paid. Also, since the old loan is probably paid in arrears, the lender will add interest from the first day of the month in which the loan is paid off through the actual date of the payoff. Finally, if the old loan is relatively new and it is paid in arrears, the borrower will have paid down only a small portion of the principal. The additional interest paid in arrears can actually make is seem as though one is paying off more than one borrowed.