to Avoid Nasty Surprises at the Closing Table A few steps.
taking all these preliminary steps, and saving money in the process, you're finally
ready to stride confidently to the closing table, ready to sign the dotted line.
Don't let down your guard! There's a saying in the real estate industry that you
could hide a Volkswagen in a stack of settlement documents, and most homebuyers
wouldn't find it. In other words, those documents contain so much information
that it's easy to miss a key detail or discrepancy that could cost you hundreds
or thousands of dollars.
Check Closing Costs... And
Good Faith Estimate
You should have already received a copy of the Good Faith Estimate of Settlement
Costs-the lender or mortgage broker was required by law to provide it after you
applied for the loan. Consider the Good Faith Estimate your guide, as a consumer,
to the service charges you'll be asked to pay for closing. Take your time going
over the numbers. Remember that these are estimates and not guarantees-the lender
might need to adjust the numbers at closing. But that doesn't justify major price
swings. You relied on the Good Faith Estimate in comparison shopping for a loan,
so you have every right to question any major discrepancies.
This statement is a final itemization
of all your loan costs and terms. You have the right to inspect the final Settlement
Statement one business day before settlement. Call your lender or settlement agent
and request that they fax or deliver this document to you ahead of time. In cases
where there is no settlement meeting, the escrow agent should deliver it to you
prior to performing the settlement.
Look for Discrepancies
Be sure to compare the original Good
Faith Estimate of Closing Costs with the final HUD-1 Settlement Statement. Note
any large discrepancies in fees charged and bring them up with your lender or
settlement agent. Also, remember that everything's negotiable. Beyond challenging
simple discrepancies, however, the time to negotiate major closing costs is long
before you reach the settlement table. By that time, it's too late to rock the
The HUD-1 Settlement Form is available here.
let's look at some pitfalls to avoid:
1. Not being prepared
to do everything on closing day can be a mistake. You need to know what is going
to happen and make sure that everything is done prior to that day (or meeting
2. Not realizing that new construction homes may
require a little more finessing at the table. If the house is not absolutely complete,
your lender may want to hold back some of the money until the work is complete.
3. Not doing a title search or getting title
insurance can make you lose your home. This insurance protects you from another
person claiming to own your house.
4. Not taking the time
to compare homeowner insurance policies for the best deal. Lenders will require
you carry a policy. Be sure to take charge and get the best one for you.
5. Not having an inspection and walk-through prior to purchase. The inspection
will tell you if there are problems with the home that need to be addressed at
closing. The walk-through makes sure that everything is the way it is supposed
to be according to the contract, i.e. the curtains are still there, there is no
new damage from the sellers moving out, etc.
6. Not being
prepared to fight a low appraisal so you can get the house and funding. A low
appraisal could cost you the house. If the appraisal is lower than the loan amount,
the lender will readjust the amount to be lent. This means you will either have
to walk away or raise your down payment to cover the difference.
Not checking, rechecking and checking again closing fees before signing the documents
and cutting your check. It is easy to be fooled by the stack of papers on the
table and pay more than you should. Take your time and make sure everything matches
the Good Faith Estimate or is a logical and explained adjustment.
Wraps Up the Settlement Process
Ready for a quiz to
test your new skills? Be sure to review the sections of the course related to
your wrong answers!
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