mortgage financing

The mortgage closing or settlement (escrow closing) probably causes more questions from the borrower than any other—we will answer some of the most frequently asked questions.

A settlement may involve several people, and a variety of documents and fees. Once you understand what is involved, you may Find the entire closing process simpler than you might have imagined. While this section focuses on settlements in home purchases, much of the information also will be useful if you are refinancing a mortgage.

We'll start with two important facts

• Many buyers think of settlement as the last step to becoming the legal owners of their new home. But it's a process that begins weeks or even months before, and follows an outline set largely by a buyer's original offer to the seller of the house. That offer becomes the sales contract, once it's signed by the seller, and it covers many of the key elements of the settlement or closing.
• Practices differ from one locality to another regarding who pays what closing costs. Across the country, however, buyers and sellers are free to negotiate certain fees. In some cases, certain costs can be shifted, it may affect the sale price of the property. In most states, costs can also be cut by shopping around among providers of the settlement services.

The point is this: The more you know about the process, the better your chances are for saving money at settlement time.

Types of Closing Costs

There are three basic categories of charges and fees in settlement or closing transactions:

• Charges for establishing and transferring ownership
  These include title search, title insurance, related legal fees, notary charges, hazard insurance, and fees for conducting the settlement.
• Amounts paid to state and local governments
  Recordation fees, and prepaid property taxes.
• Costs of obtaining a mortgage
  These include appraisals, credit checks, loan documentation fees, loan origination, commitment, and processing fees.