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Lesson 8.2

Closing Day & Beyond

 
Chris Birk | Author of "The Book on VA Loans"

Your Journey’s End

This marks the end of the homebuying process and the start of your new life as a homeowner. The homebuying journey comes to a close with a flourish of signatures. It’s time to celebrate achieving the dream of homeownership!

Every buyer's closing day looks a little different. But here's a look at some common aspects of what will hopefully be a memorable and joyous event.

Final Walk-Through

Your purchase contract should stipulate your right to a final walk-through within 24 hours of closing.

Your real estate agent may or may not accompany you to this last pre-purchase visit. Take a close look and make sure that all repairs have been completed; all included appliances and fixtures are present; and that all unwanted items have been removed by the previous owner. Alert your real estate agent immediately if you detect any problems.

Making Payment

After a careful review of the Closing Disclosure, your agent and lender will let you know if you need to bring payment to the closing table. Closing agents usually require either a cashier’s check or a verified wire transfer as the only suitable forms of payment. You can’t just write a personal check or bring cash. If your seller has already agreed to pay closing costs, you may not have to bring any money to close.

Who Attends Your Closing

A representative of the title company usually runs the closing meeting. Give yourself at least an hour to be safe. Some closings may take more time, and some take less. The closing agent explains all paperwork and gets the necessary signatures.

Your real estate agent will usually attend the meeting, too. It’s extremely comforting to have a knowledgeable and familiar advocate by your side in case any problems or questions arise. The sellers and their real estate agent may also be present. A seller might also choose to complete the necessary paperwork in advance.

What You Will Sign

Get ready to feel like a celebrity. Your signature plays a pivotal role during the closing process, and is required on numerous documents, including:

  • Closing Disclosure: The Closing Disclosure is a final review of all loan fees and costs and must be made available to buyers at least three business days before closing.
  • Promissory note: This is basically a legal IOU. The promissory note details the lending agreement between you and the lender, including the loan amount, the interest rate and the number of years in your mortgage term.
  • Mortgage or deed of trust: You’ll either sign a mortgage note or a deed of trust, depending on where you’re purchasing. These basically do the same thing – pledge the property as security for the loan. This allows the lender to take back the property if you stop repaying the loan.
  • Warranty deed: The deed transfers legal title of the property to the new owners.
  • VA Form 26-1820 (Report and Certification of Loan Disbursement): This document helps confirm that the lender is closing a loan that meets VA guidelines and regulations. VA buyers will also certify their intent to occupy the property as their primary residence.
  • IRS Form 4506-T (Request for Transcript of Tax Return): You’ve likely already signed this form once during the loan preapproval process. But it’s become common for lenders to double check your income and tax information, including individual tax returns, W-2 wage and tax statements and more.
  • Initial Escrow Account Disclosure: This statement estimates how much you’ll contribute to your escrow account during the first year of your mortgage. VA buyers typically escrow money each month to cover their annual property tax and homeowners insurance bills. Your mortgage servicer is responsible for making sure these get paid.
  • Borrower’s Certification & Authorization: This is a common form for home loans and certifies that the information you’re providing is accurate. This form also authorizes the release of credit, tax, employment and income records to the VA or to lenders that may purchase the mortgage on the secondary mortgage market.
  • Affidavit of Occupancy: This is another common form during loan closings. VA buyers must certify their intent to occupy the property as their primary residence, typically within 60 days of closing.

Taking Title

During the loan closing, you’ll finalize the title for the property. There are a number of ways to hold title, and it’s not a throwaway decision. Divorce, death, lawsuits and more can all lead to title-related implications.

Common ways to title a property include:

  • Joint tenancy: Two or more people holding title jointly, with equal interest in the property. This is common for spouses and couples. Joint tenancy features a right of survivorship, which basically means the ownership of the home transfers fully to the remaining tenant.
  • Tenancy in common: Unlike joint tenancy, one tenant in this setup can own a larger share of the property than others. There’s also no right of survivorship.
  • Sole ownership: This is when just one person holds title, even if there are multiple parties involved with the home loan.

If you have questions about how to title your property, talk with your loan officer, a financial professional, an attorney or all of the above well before closing day. Every buyer’s situation is different, and some title scenarios may be more beneficial than others.

Recording the Deed

Your lawful ownership of the property is enshrined in what’s known as a deed. It’s a legal document that attests to a transfer of homeownership – the home is changing hands from the seller’s to yours.

After your loan closing a title company employee will usually take your deed to your county’s administrative offices, where it will be formally recorded. The recording fee is typically part of your closing costs.

At this point, your home purchase is a matter of public record. Some of the information associated with the transaction will be accessible to anyone in your community and beyond.

Servicing Your VA Loan

When it comes time to make your first mortgage payment, you may not be sending the money to the same company that financed your home purchase. That might sound odd, but it’s completely normal.

Some mortgage lenders will make a loan and then go on to service it, meaning they collect the monthly payments, handle the escrow accounts for your property taxes and homeowners insurance and more. But lenders can also sell the servicing rights for the loans they make, along with the loans themselves.

That means another company is now responsible for collecting those payments, forwarding on your principal and interest portions and even initiating foreclosure proceedings. It’s important to understand that the rate and terms of your loan won’t change if this happens.

Buyers will encounter and sign a “Servicing Disclosure Statement” as part of their loan process paperwork. This document outlines your lender’s servicing policy. Basically, you’ll learn one of three things: The lender will not service your loan; the lender will service your loan; or the lender may decide to sell your loan servicing at some point after the loan closes.

Lenders are required to notify you at least 15 days before your loan servicing is transferred to another company. These disclosures must include:

  • The effective date of the transfer.
  • The name, address and phone number for an employee or a department at both the current lender and the new servicer who buyers can contact with questions.
  • The date the original lender will stop accepting payments and the new servicer will start.
  • Written acknowledgment that the transfer of servicing rights doesn’t affect any other terms or conditions of the loan.

During a 60-day period beginning with the effective date of your servicing transfer, your new mortgage servicer can’t charge any late fees or penalties if you accidentally send your payment to the wrong place.

Please don’t take it personally if your lender winds up selling your loan servicing. Some lenders don’t service any of their loans. Others service some and sell others. It’s a purely financial decision.

This is another way for VA lenders to generate revenue, which, in turn, helps them make more home loans to veterans, service members and military families.

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