Many people find themselves overwhelmed by the many details of closings. I was one of them until I learned about a simple process that really simplifies the whole process. This process makes the entire closing as easy and painless as possible.
When you purchase a house, your mortgage covers the closing cost. The lender will send you a form at the beginning of the loan that describes the specifics of the transaction. This includes the amount of money you owe the lender, the amount of money you have to pay back, and who is the title holder on the property. Some lenders do not use the title to close the loan; instead they use an escrow account. With this type of closing, the escrow account holder is the person who pays the loan back once the property has been transferred to someone else. Your lender will send you an escrow agreement after the close of the loan.
In this article, we will discuss the escrow account and what payments should be made once the loan has been paid in full. First, make sure you understand what payments your lender will require. Depending on the type of mortgage you have, the lender may require partial payments at the close of the loan, deposits, other fees, or a combination of all of these. If your mortgage has a deficiency balance, your lender may require extra payments at the close of the loan.
Usually, your lender will require partial payments at the close of the home loan. This means you will have to send out two or more payments, depending on the type of mortgage you have. Two payments can be sent to the title company, or one payment can be sent to the title company and the other to the bank. Make sure you understand the requirements of your mortgage application. This will help you keep track of what payments you need to make.
If your mortgage loan has a balloon payment, you will probably not be required to send out a payment for this balloon payment until sometime after the closing date. The loan balloon is the amount of the remaining loan balance that you will be required to pay on the closing date. In order for this balloon payment to be paid, it must be repaid within a month or less from the date of closing. For mortgages with balloon payments, your interest rate may also increase at any time prior to the scheduled closing date. Your bank may require that you prepay the balloon payment if you choose to repay it within a month or more.
Some mortgage lenders will provide you with an additional key step in the closing process. This is called escrow deposit. It is typically required for loans that are not exempt from the first mortgage. An escrow deposit can be a small amount, but it can go towards paying off the loan if there are not enough monthly payments from you.
As mentioned earlier, when it comes to the closing documents, be sure to read through them carefully. You will be required to provide your loan documents and your closing statements. Your closing statements are very important because they will outline each of the closing payments you have agreed to make. Be sure to double check these documents before mailing them off.
When you receive your loan estimate, make sure you check it against your closing disclosure. You need to make sure that the numbers match up. If they don't match up, there is a good chance that there are going to be adjustments to the numbers. This could mean a different total amount due, or it could mean that you will have to go back to the lender with revisions to the closing disclosure. Reviewing your loan documents and statements prior to mailing them to the lender will help you avoid any costly mistakes.