Buying or refinancing a house is a highly complex transaction, and a proper closing ensures every detail will be finalized – leaving nothing to chance. Whether you’re purchasing or refinancing in Florida, it’s always important to understand what goes on when you close on a home.
What does it mean to close on a property?
The closing is the final stage of the process, which is great news: It means you’re nearly there. You’re about to have a home you can truly call your own.
It’s helpful if you know ahead of time what part you’re expected to play in the closing process. Brushing up on some of the terminology will also help to prevent you from getting lost in the jargon along the way.
LTV, for instance, is your loan-to-value ratio. This is the grand total of a mortgage versus the value that the home was appraised at.
DTI (debt-to-income ratio) is a method of checking in to see if you’ll be able to pay off your debt. This is done by comparing how much of the debt you pay off per month with how much you earn per month before taxes.
What does the closing process entail?
Closing starts by looking over all the loan documents and signing them. Some of the papers that might be included in this phase are:
- Deed of trust
- Promissory note
- Closing disclosure statement
If it applies, you might also be providing documents for homeowners’ inspections and insurance. Next comes covering the expenses. This must be done in the form of either a cashier’s check or a certified check.
Here’s what you’ll have to pay for in a real estate closing:
- Closing costs
- Prepaid interest
- Down payment
These funds are distributed to the closing agent by your lender. Setting up an escrow or impound account is sometimes necessary to pay for homeowners insurance and property taxes, but this may vary based on the terms of your loan. Finally, once all the papers are signed and the payments have been made, you are handed the keys to your new home.