The Settlement Process
WHY is it so important that You choose the settlement company which is to conduct the closing on the purchase of your home?
That company which you choose will be entrusted with protecting your money in the largest investment you will ever make!
Perhaps, the explanation of the settlement process and how it benefits you will illustrate the importance of the choice of a settlement company.
The settlement process actually begins with the signing of the purchase and sale contract.
You should perform whatever “due diligence” is necessary before executing the contract, i.e. carefully inspecting the house by checking the roof, the basement walls and floor, and testing the operation of the heating and air conditioning, electrical and plumbing systems, as well as the major appliances of the home.
Before signing the contract, make certain that it addresses any repairs or replacements you expect; conditions the purchase of your new home on the sale of your existing home; and gives you the right to void the contract if structural, mold, radon, or termite inspections show defects which the seller is unwilling to correct.
The contract is the one controlling document between you and the seller. Only, that which is written in the contract will be addressed at settlement – nothing more.
You now make application for the loan to purchase the home. If you have not already been pre-qualified for the needed loan amount, the loan officer of the lender you have chosen will determine if you are qualified to purchase the home. He will provide you with a “good faith” estimate of costs, which will give you a very good indication as to how much money you will need to complete settlement. And, finally, he will give you the opportunity to “lock-in” the interest rate on your loan for the next thirty years or he will allow you to “float the rate” by letting you monitor the sometimes daily changing of the rate with the hopes of locking a lower rate before settlement.
While you are now awaiting settlement, what is it that we, the settlement company, are doing on your behalf in order to get you to settlement?
First of all, we are examining the records at the courthouse to determine if the seller has “good and marketable title” to the property to pass onto you, the buyer.
- What is a seller’s “good and marketable title”? - It is the seller’s ability to transfer the deed or title to the property to you free and clear of all mortgages, liens, judgments and encroachments so that you will have peaceful enjoyment of your home and property.
As the title company, we certify that all real estate taxes are paid to date. If there are mortgages on the property, we would obtain payoff amounts from seller’s lenders so that we can pay the loans in full from the seller’s proceeds and release the liens of the mortgages which are recorded against the title. If there are judgments or liens due to the non-payment of seller’s state or federal income taxes, we would determine the amounts to satisfy the judgments and liens and pay them from the seller’s proceeds. We certify that all condominium fees, homeowners association fees, front foot benefit charges imposed by the original builder for the installation of the sewer and water lines to the house, water bills, and real estate taxes are paid current, as you, the buyer, will assume these obligations as of the date of settlement.
We will order a “house location” survey to ensure you that your house and any additions do not violate county building restriction lines for each lot, that your neighbor’s improvements, driveway or fence do not encroach onto your new property, and that the improvements to your new home, whether it be swimming pool, deck, shed, or driveway, are built completely within your property lines.
So long as your loan approval has been received, once we can certify to both you and your lender that all of these requirements have been satisfactorily met, we can coordinate with your lender to schedule the settlement.
At the Settlement
At the settlement, the attorney or a licensed settlement officer, will explain the costs of settlement by reviewing with you, the HUD-1 Settlement Sheet, the terms of your loan as stated in the Promissory Note and the Mortgage/Deed of Trust, and the remaining documents of settlement. We will obtain the signature of the seller on the Deed transferring ownership of the property, free and clear of all liens and encumbrances, and we will record the Deed along with the lender’s mortgage immediately following settlement in order to establish your ownership amongst the Land Records of the County where the property is located.
Your lender will require you to purchase lender’s title insurance to protect their mortgage interest in your property.
We strongly recommend that you also purchase Owners Title Insurance, a one-time premium which may be the best investment of monies you make to protect your interest in your new home.
We will complete the transaction by using the seller’s proceeds in order to payoff and satisfy any outstanding mortgages, taxes, judgments or liens of the seller to ensure you received “good and marketable” title to your new home.