When you buy or sell a home, the real estate closing is the final hurdle, the finish line when the property transfers ownership. But instead of a celebratory anticipation of the settlement date, many consumers face the day with trepidation.
In an April speech, Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), said, “Without a doubt, the mortgage closing process is complicated for everyone involved and is most stressful of all for the home buyer.”
A well-prepared buyer or seller who has seen the documents to be signed ahead of time and understands what will happen at the closing should feel confident that the transaction will be simple. Most settlements are uncomplicated and take about an hour, said Brenda Heffernan, managing lawyer for MBH Settlement Group in McLean, Va.
Beginning in August 2015, the settlement process will be tweaked by new CFPB rules, said Sam Gilford, a spokesman for the CFPB. Called “Know Before You Owe,” the regulations include simplified loan estimate forms and closing disclosures. The loan estimate form, which will replace the Good Faith Estimate, will be given to consumers within three days of submitting a loan application. Three days before the closing, consumers will get the new closing disclosure form that replaces the Truth-in-Lending and HUD-1 statements.
“Getting the closing disclosure early will ensure that consumers can review their final loan terms and costs before sitting down at the closing table, and gives them time to ask questions,” Gilford said in an e-mail. “The rule also establishes limits on closing cost increases.”
Even before those changes take effect, the best way a consumer can prepare for settlement is to partner with a good real estate agent and loan officer, said Helen Krause, marketing director for New World Title and Escrow in McLean.
“The most important thing to do is to stay in constant communication with your Realtor, your lender and your title company,” she said. “The title company comes into play after the contract is written and is typically chosen by the buyers.”
Preparation before settlement means consumers have a better experience at the closing, said Randy Rothstein, president of Paragon Title in Bethesda, Md.
Krause said consumers need to bring government-issued photo identification to the closing along with a certified check or a cashier’s check for the down payment and closing costs, unless you have made arrangements to wire the money in advance. The exact amount often changes slightly at the last minute, so you also need a personal check to cover extra amounts up to $1,000. If you overpay with your certified method of payment, the title company can immediately write a check or wire the refund to you.
“Buyers are often surprised that you can’t use a debit card, a credit card or even cash at a settlement,” Krause said.
Most title companies send information to buyers long before the settlement day to tell them what to expect and so they can preview sample documents.