Mark Wozniak: In this segment we are going to be talking about the settlement which is really the final part of the home buying process. It’s really a time of great anticipation and also a time of a real flurry of activity when the banks may need to be rechecking something for a final time. The settlement company may need to re-send us a few documents, have the banks send some new stuff. So suffice to say there is just a lot going on in those final 24-48 hours before the settlement itself occurs.
Leigh Anne Monk: And actually, Mark, we are actually a part of that and you are too because one of the things that we like to do is review the primary settlement statement that’s called the HUD 1 and we do that prior to settlement so you have no surprises in terms of the numbers. The department of housing and urban development has put together a mandatory settlement statement that outlines all of the charges that you’ve already seen on your contract as well as all the closing costs that both the seller and the buyer incur as part of that transactions.
Mark Wozniak: And that’s the HUD 1 document.
Leigh Anne Monk: The HUD 1 document. On the front of the HUD one document it is clearly laid out on the HUD 1 the front side of the document has a seller column and a buyer column and on the front side you’ll have all the listed all of contractual pricing numbers. For example, you’ll have your purchase price; you’ll have your down payment, your loan amount, the seller subsidy if the seller agreed to do that as part of your contract. All those pieces are clearly outlined on the front side of the document. One the reverse side of the settlement statement this HUD 1 there are other categories such as all the lender charges so if you have any loan origination fees or you paid points on your loan to reduce your interest rate all those outlined in addition there are charges such as the interest that the lender has to collect up front to build part of your escrow into your actual mortgage itself. There are also different settlement charges that the title company needs to charge currier fees, recording fees, and a key settlement charge is something called title insurance. Now with title insurance there are actually two different kinds, the owners title insurance and then there lender’s title insurance. The lenders title insurance is mandatory and you do need to pay that as the homeowner this ensures the lender that he has insurance protection if a future claim comes up against the title of that particular property. The owner’s title insurance is not a mandatory insurance policy you do have the option of selecting it or not and we just encourage you to work with your agent and title company to make the decision best for you. And our experience I do know Mark most of our clients do elect to go ahead and purchase owners title insurance that’s just additional protection but it is really up to the client and they can make that decision.
Mark Wozniak: Right because that protects the buyer because you mentioned the banks protected with the lender’s insurance and this will protect you the buyer if there is any claim that comes up against the title.
Leigh Anne Monk: Exactly, exactly. And the final category on the HUD 1 of course is taxes we have to pay the government what they are due and the real estate taxes are also outlined on the HUD 1. So the concept here is you actually see that document prior to settlement day so you’ll have a feel for the numbers. You might want to review those numbers with a good faith estimate which is the document that your lender provided you outlining the proposed closing costs. So again the concept here is no surprises you get to go as Mark eluded to earlier with great anticipation to this day versus being concerned at all because you’ve seen all the numbers up front. The other thing that happens on settlement day itself typically is the final walkthrough. What that means is you will go with your agent to the property prior to settlement and you are primarily going to look and make sure that everything is in working order. The lights turn on, the plumbing works; the appliances still run fine and in particularly you may want to look for those things that got repaired as part of the home inspection process. The good news is say for example there’s something that got repaired on the roof you don’t have to climb up there and look at it. The seller has an obligation to provide you with a receipt of that repair so you know that everything has been done. So basically the walkthrough is to make sure that everything’s been cleared out if the sellers have already moved out and it is broom swept as we like to say and already to go. Then you are able to proceed to the title company for the settlement itself. Now one of the things to bring to the settlement and it’s really important that you don’t forget to bring these things because this could make it a little bit longer process then only would need to be necessary. The first thing you need to bring is your ID and a driver’s license is just fine and just want to encourage you to make sure you bring a non expired driver’s license it does help to have it to be accurate. It has actually slowed down some settlements when someone actually had an expired driver’s ID. Of course one of the most important things you need to bring are the funds. These are the funds that you need to bring which might include the down payment and will include some of your closing costs. Now often the settlement company will have contacted you prior to settlement and they would have explained to you that they need a wire transfer of “x” or you can bring a cashier’s check it’s always also good just in case to bring your checkbook along in case there is any change or any inaccurate or what is a good word for it, just an adjustment that needs to be made at the last minute.
Mark Wozniak: Right, right because the funds you mentioned bringing are what’s reflected on that HUD 1 we talked about earlier that is going to say this is how much you need to bring to settlement to cover all of your costs, your down payment, your everything. But they can have a charge that is off a little bit off from the draft version and it’s just good to have that checkbook so you can write a check usually for a minimal amountif they have to make an adjustment.
Leigh Anne Monk: Exactly, exactly. And finally if there is a buyer that is unable to attend the settlement you may have a power of attorney established for settlement day. You just need to bring those power of attorney documents with you as well. So what happens in settlement is the buyers and sellers come together at a table and there is a processor from the title company themselves and they will walk you through all the various documents. Now you as the buyer guess what you get to sign most of them. You got a loan to sign and you get a deed to sign over so you might be there just a little bit longer than the seller.
Mark Wozniak: You got the thick stack.
Leigh Anne Monk: You get the thick stack so get your handwriting hand ready to go and you will need to sign every document and any person who is going to be on the loan will be signing on the documents, Now just a quick clarification you don’t always have to be in the settlement with the sellers there are sometimes cases where your schedule doesn’t coincide with the properly with seller and you can what they call a split settlement but that happens once in a while. It doesn’t matter either way at the end of the day you get to walk away with your keys and hopefully some garage door openers if you have those and you get to enjoy your new home.
Mark Wozniak: Right, the settlement process itself for the buyer takes a little bit longer than the seller because again your stack of papers is longer but typically within one to two hours assuming no hiccups the settlements is done and hopefully you’re walking away as the happy homeowner. Now it’s important to know that the deed then gets recorded usually within the next 24 hours and then within the books you are officially the homeowner as well. So thank you so much for watching our series on the home buying process again this was the settlement. Thank you very much.