After selecting a house for purchase, the moment of highest anxiety comes at the closing. The legal procedures of a closing vary from state to state, and the use of a professional real estate agent or real estate attorney is highly recommended. Even a seemingly simple purchase is complicated.

The initial step is to agree upon a date and time for closing. It is not unusual for this to be changed due to the large number of people involved, the list of verifications to be completed and the various legal processes that must be completed.

Once at the closing, be prepared to understand the various fees and prepayments that you will either pay outright or have added to your settlement costs on the closing statement.

Fees

Fees are charged by the lending company. These include a loan origination fee, appraisal fee, credit report fee, and possibly loan discount "points".

Additional fees are the buyer's responsibility. These fees include attorney's fees, recording and transfer fees, title fees, termite inspection fees (some states require the seller to provide), and survey fees.

Prepayments

The major function of prepayments is to establish an escrow account. The escrow account will pay Property Taxes, Insurance Premiums, Mortgage Insurance, and Hazard Insurance. After closing, a portion of your monthly payment will go to maintaining the escrow account. You will be responsible for paying the money to begin the escrow account at the time of closing.

Another prepayment is the amount of loan interest accrued between the time of closing until the first monthly payment is made.

The real estate agent or attorney will coordinate the completion of the procedures in the FEES and PREPAYMENTS sections and should provide the buyer with an estimate of the costs. The agent will also specify the method of payment for the closing costs- probably a certified check.

Prepayments are the most overlooked cost of purchasing a home. The initial funding of the escrow account can be substantial - prepare ahead and don't be surprised.

Loans

Make sure you understand the specifics of the loan you are closing. At closing you will be asked to sign many documents, including notes and security deeds. If you understand the loan you requested, you will be better prepared to understand the documents you are asked to sign. The paperwork is generally in order and the boilerplate is difficult to read, but you need to confirm that the documents you are signing are consistent with your agreement.

Your real estate agent, banker or mortgage broker will have provided various loan types and interest rates for your choice. Be a wise consumer and know the going rates. These are available in newspapers and on websites. Be aware that an advertised low interest rate on a loan often has hidden costs or is offered by an unreliable company.

Two basic types of loans are fixed rates and variable interest. Remember that over the lifetime of a loan the economy changes and a variable interest rate loan may not be attractive in future years. With a variable interest rate loan, when interest rates rise, monthly payments increase.

The maze of paperwork and procedures is designed to protect all parties from fraud.
An example of protection is the title search. Professionals conduct a certified title search. Without a certified title search, if the rightful ownership is contested in the future, the buyer could lose the investment. The lender will insist that you purchase title insurance to cover their investment. Most purchasers should purchase an additional title insurance policy to protect their own investment. These policies are less expensive when the lender has a policy in place. Be aware that the closing attorney makes a commission on the policy and that the fee is often negotiable.

• Calculate your budget to realistically ascertain the house you can afford. Many people get overextended and become "house poor";.
  
  
• Do not hesitate to ask questions about fees and procedures you do not understand.
  
  
• Make sure all problems concerning the house are agreed upon. Stipulate money be withheld until the problems are fixed.
  
  
• Protect your interests. Conduct your own inspections as well as relying on professionals.

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