The closing or settlement of a home purchase is simply the formal process in which the ownership of the house lawfully passes from the seller to you, the buyer. Procedures vary around the country. Usually, on a mutually agreed on settlement day, you, the seller, and a closing attorney whom you hire sit down. (With a newly built home, the seller might not be at settlement.) You will be given dozens of papers to sign.
A lot of these papers mean you are agreeing to disburse payments to the seller, the lender, and others. That raises an important point. You shouldbe mindful that you have to pay lots of costs in cash during closing. The costs will vary depending on the region of the country. You can figure the costs would total 3 percent to 5 percent of the purchase price. Hence, for a $100,000 house, this could reach between $3,000 to $5,000 or more.
Not all of these include costs to you. A big portion is depositing money into escrow accounts to make future payments on taxes or insurance. The point being, you should be prepared to shell out a lot of cash during settlement.
Underthe Real Estate Settlement Procedures Act (RESPA), the lender needs to send you a "good faith" estimate of the closing costs within three days after applying for a mortgage. The law also demands that you be able to review a list of actual closing costs at the closing attorney's office a day before you go to settlement.
But you don't have to wait until then to learn how much the closing costs would be. You had better try to prepare a detailed estimate while you're shopping for a loan, not after you have already applied.