Loan Settlement - Landmark Mortgage

Of all the steps in buying a home or refinancing a loan, the mortgage closing or settlement probably causes more confusion and uncertainty for the borrower than any other.

A settlement may involve several people, and a variety of documents and fees. Once you understand what is involved, you may find the entire closing process far simpler than you might have imagined. While this brochure focuses on settlements in home purchases, much of the information also will be useful if you are refinancing a mortgage.

Two important facts.

Fact Number 1: Many buyers may think of settlement as the last step to becoming the legal owners of their new home. But it's a process that begins weeks or even months before, and follows an outline set largely by a buyer's original offer to the seller of the house. That offer becomes the sales contract, once it's signed by the seller, and it covers many of the key elements of the settlement or closing.

Fact Number 2: Practices differ from one locality to another regarding who pays what closing costs. Across the country, however, buyers and sellers are free to negotiate certain fees. In some cases, certain costs can be shifted, it may affect the sale price of the property. In most states, costs can also be cut by shopping around among providers of the settlement services.

The point is this: The more you know about the process, the better your chances are for saving money at settlement time.

Types of Closing Costs
There are three basic categories of charges and fees in settlement or closing transactions:

Charges for establishing and transferring ownership.
These include title search, title insurance, related legal fees, and fees for conducting the settlement.
Amounts paid to state and local governments.
These include city, county and state transfer taxes, recordation fees, and prepaid property taxes.
Costs of Getting a mortgage
These include survey, appraisals, credit checks, loan documentation fees, notary charges, loan origination, commitment and processing fees, hazard insurance, interest pre-payments, and lender's inspection fees.

Title Search: Who Owns What?

When someone buys or sells a car, proving ownership is relatively easy. The owner has a certificate of title issued by the state in which the car is registered. When it comes to houses, providing clear title is not so simple. Moreover, your lending institution will not give you a mortgage loan on a house unless you can prove that the seller owns it. The proof comes in the title search.

How the title search is carried out depends upon where the property is located. In many parts of the country, public records affecting real estate title are spread among several local government offices, including recorders of deeds, county courts, tax assessors, and surveyors. Records of deaths, divorces, court judgments, liens, and contests over wills (all of which can affect ownership rights) also must be examined.

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