Prior to arrival at the attorney's office, the buyer should check to insure that he/she has the following items: [1] a certified check for the amount needed at closing, [2] insurance binder, [3] good faith estimate provided by the lender to compare to actual closing costs, and [4] any  list of questions to discuss with the seller based on the final walk through.  Both buyer and seller attend the closing along with the real estate broker and usually a representative of the bank.

The actual closing usually takes less than an hour.  Numerous documents must be signed including: 

• The Mortgage Note:  Outlines the amount of the debt, repayment terms and payment amount, the interest rate, any margins or caps for ARMs, lender name (beneficiary), borrower name (mortgagor),  and other items  required by the lender. 
• The Deed Of Trust (Mortgage):  A deed of trust is a contract between the borrower, lender, and a third party - a trustee.  The borrower transfers the property to a trustee for the benefit of the lender as security for the borrower's loan. Not all states use deeds of trust. Some use a mortgage which is the conveyance of an  interest in real estate used as security for repayment of a note. In any event, the security instrument outlines the legal procedure taken in the event of default.  The security instrument is usually recorded as a public document in the Register of Deeds office in the county where the property is located
• Deed of Trust Riders:  If the loan is an Adjustable Rate Mortgage (ARM), the lender will usually require that a "rider" be recorded along with the security instrument which outlines the conditions under which the repayment terms of the mortgage can change and changes in escrow amounts.  
• Truth in Lending Statement - (Regulation Z):  This is a federally required statement that states the actual costs of the loan over the life of the mortgage and the annual percentage rate (APR).
• RESPA or HUD Settlement Statement:  - (HUD1):   The closing statement  outlines the final costs of the loan.  The borrower receives this document usually within  3 to 5 days after loan closing.

• Environmental Disclosures:  The lender will likely require a UFFI certificate  (Urea Formaldehyde Foam Insulation) and a Lead Based Paint disclosure. The UFFI discloses to the lender the possible existence of any Urea Formaldehyde present while the Lead Paint disclosure informs consumers of the hazards of lead based paint.

• Hazard Insurance Policy:   The policy must have fire and extended coverage that covers the loan amount with the lender indicated as "loss payee".

• Title Insurance Policy: The lender will require a title insurance policy that covers against loss in the event of a title (ownership) dispute.
• Additional Documents:  Escrow account statements which describe the monthly and yearly amounts of "escrow" for taxes, hazard insurance, and any PMI (private mortgage insurance)  to be collected by the lender. 

Once all closing documents are signed, the deed and mortgage will be recorded at the Registry of Deeds and the attorney will then "close" the loan  disburse funds.

How Much Money Is Needed At Closing? 

The amount of money needed at closing will depend on the following four items:

• Any remaining part of the down payment not submitted with the original purchase offer (earnest money).

• Out-of-pocket costs for the loan including points and legal costs   (usually estimated in the "Good Faith Estimate" provided by the lender at loan application).

• Reimbursement to the seller for any "non-realty" items such as fuel oil in the tank, appliances not part of the real estate, etc and any proration of property taxes due. 

• Prepaids or "reserves"  for such items as property taxes, insurance, PMI mortgage insurance, and flood insurance. 

For any item that is required to be a part of the escrow payments, the borrower "prepays" a portion of the above expenses so the lender can make these payments to the appropriate entity when due from escrowed (reserve) funds.   Usually  2 to 6 months is collected (prepaid) at closing for property taxes, a full year's premium is collected for hazard insurance, and usually 2 months payments of mortgage insurance. Mortgage insurance may be paid monthly and does not require a full year's advance premium.  If required, flood insurance works the same way as hazard insurance. 

Most lenders will require that you provide evidence of  funds available for the down payment and/or certain closings costs.  If you do not use the funds for purchase, you may do anything with these funds after closing. 

Closing Costs

• Discount Points, Yield, and Origination

• Understanding PMI Insurance

• Rate Lock-In

• What is Escrow?