Closing Time

The Closing Process

The mortgage process ends with the closing or settlement stage. This last step requires a date to be set by the parties involved in the sale (usually buyer, seller, and any agents/brokers) to finalize all documents, finances, and inspections related to the transaction. Any outstanding closing costs need to be paid in full on or before the selected closing date. These fees can include property inspection, property appraisal, credit reports, and homeowners insurance. Whether the buyer or the seller pays the closing fees can be negotiated during the offer stage, with both parties accepting the terms. With many parties and details a part of the closing, it can be weeks or months before everything is complete, but once the process is complete, you can celebrate in your very own home!

Glossary of Common Mortgage Terms

Adjustable-Rate Mortgage (ARM) A loan that recalculates the interest rate. After the ARM fixed-rate period ends, the interest rate mortgage moves up and down based on the index it is tied to. The index is an interest rate set by market forces and published by a neutral party. There are many indexes, and the loan paperwork identifies which index a particular adjustable-rate mortgage follows.

Annual Percentage Rate (APR) The yearly cost of credit over the life of a loan. Typically includes interest, service charges, points, loan fees, mortgage insurance, and various other mortgage items.

Closing The process of transferring funds to pay for a property, paying fees and closing costs, and the signing of documents that transfer the deed for a property from a seller to a buyer.

Closing Costs Charges incurred and due for obtaining a mortgage loan and transferring real estate title.

Closing Date   The date set by all parties to finalize the transfer of property and to be referenced within the mortgage contract for legality.

Conventional Mortgage Type of loan that is not insured by a government agency (such as FHA or VA).

Convertibility The ability to change a loan from an adjustable-rate schedule to a fixed rate schedule.

Default A breach of a mortgage contract. Usually from not making mortgage payments for a certain period.

Escrow The handling of funds or documents by a third party on behalf of the buyer or seller.

Federal Housing Administration (FHA) A federal government agency that insures mortgages for financial backers.

Fixed-Rate Mortgage A mortgage with an interest rate that remains constant over the life of the loan.

Funding Fee A one-time fee applied to VA mortgages paid by qualified service members or surviving spouses.

Mortgage A loan with a contract for the buyer to agree to repay principal and interest to the financial institution funding the sale, with the property used as collateral while payments are repaid in installments over a specified period.

Principal The full amount borrowed in a loan that excludes interest and other charges.

Private Mortgage Insurance (PMI) A type of mortgage insurance for conventional loans usually required for loans with smaller down payments (less than 20%).

Refinance To finance (something) again, typically with a new loan at a lower rate of interest.

Settlement See closing.

Title A deed or certificate legally confirming the ownership of property. During a mortgage, the financial intuition that funded the purchase money will legally own the property and hold the title until the buyer has met all mortgage financial requirements.

Veterans Administration (VA) A federal government agency for active or honorably discharged veterans and surviving spouses that offers mortgages with reduced or waived down payments and/or mortgage insurance, but a funding fee may be applied.