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Congratulation! It's closing time:
At the closing, all the parties (you, seller, lender,
attorneys, title company and the real-estate agent) come together to
complete a real estate deal. Before you can walk away with the keys to your
new home, you'll have to write checks, sign quite a bit of documents. Your
lender will provide you with a closing statement that itemizes all the
charges (points, filing fees, mortgage tax, attorney's fees and prorated
real estate taxes to the seller) you'll have to pay at the settlement.
Below are legal documents and terms you need to know.
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- The mortgage - This is a standard legal
document that describes your agreement with the lender, the property
itself and the amount of the mortgage.
- Truth-in-Lending Statement - This document
shows the real cost of the loan which includes the amount of the loan,
finance charge for the life of the loan and the annual percentage rate
(APR). APR is the actual interest rate you'll pay on the mortgage,
including fees and points.
- Certificate of title - A written opinion of the
quality of a person's ownership of property, issued by a lawyer or a
title insurance company after a search of the title records has been
conducted. A title search, or examination of property records will
insure that the seller holds the title and has the right to transfer it
to you. So that there are no claims against the property that might
jeopardize your ownership of the house.
- Title insurance - This insurance guarantees
what's in the title search. In most cases, if you’re taking a mortgage to
buy the property, the lender will require you to arrange title insurance
to protect its interest until the full amount of the loan has been
repaid. You may also arrange for your own title insurance (also known as
fee insurance) to protect you from losing your property if your ownership
is contested.
- Proof of homeowner's insurance - Homeowner's
insurance protects your investment in your home by promising to repay
some or all of the cost of repairing or replacing the home if it is
damaged or destroyed. The premium, or bill, you pay for this protection
varies based on the value of your home, its location, the extent of the
coverage, and the firm providing the insurance. If you have a mortgage on
your home, the lender will require that you have at least enough
insurance to cover the amount you owe on the loan.
- Mortgage note - This document states your
promise to repay the mortgage. It indicates the amount and terms of the
loan, and what the lender can do if you fail to make payments or pay
late.
- Certificate of occupancy - Document issued by
the local municipality indicating that the house is suitable for
occupation. Generally confirms that the house complies with local
building, safety and health by-laws.
Different ways to hold title to your property:
How you hold the ownership of the asset (title) to your
property is very important. If something goes wrong and one spouse or partner is
sued, how you and your spouse or partner own your home can mean the difference
between having to sell it to pay off a judgment, and being allowed to live in
it. Here the the most common ways to hold title to your home:
- Individual - Most likely this will be your option if
you are single. But in very few states, you may be able to hold title in a
land trust, which is a legal entity in which the only asset in the trust is
the property you are buying, and you are the beneficiary of the trust. Land
trusts may also be available to two or more buyers, married couples and
children.
- Joint tenancy - Joint tenancy with rights of
survivorship is the most common way married couples hold property. Owning as
joint tenants means each owner has an equal right to the entire property, that
none of the owners may sell their portion of the property without the consent
of the other owners and that, in the event of the death of one of the owners,
the surviving owners automatically retain title to the entire property by "Right
of Survivorship". This type of tenancy is only for married couples.
- Tenancy in common - This allow each owner to own a
stated portion of the property separately and is free to deal with his
portion as he wishes. For example, you may own 30 %, your spouse may own 30%
and your parents may own 40%, but you may each use the whole property. You
cannot be restricted to just the 30% that you won. And, you may sell your
share of the property to anyone you choose without permission from other
owners. Tenancy in common is available to unmarried or married couples.
- Tenancy by the entirety - This is similar to joint
tenancy with rights of survivorship. But both spouses must agree to the title
arrangement before the property is subject to one spouse's creditors. As long
as the couple is married, the interest of each spouse is protected. For
example, if one spouse is sued, the creditors could not attach a lien on the
house because each spouse owns the entire property. They have to wait until
the marriage is over or when the property is sold and a claim may be attached
to the proceeds. This type of ownership is not available in every state, and
it's only for married couples.
There are several less common ways you can hold title to the
property using trusts such as living trust, charitable remainder trust, land
trust, qualified personal residence trust and family limited partnership. Before
you close on your home, ask your real estate lawyer about the best way you
should hold title to your home depending on your personal situation.
Next -->>
Tapping your home equity: Refinancing & Home
Equity Loans
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