The Closing Process
Step 1: The Purchase Agreement
The Purchase Agreement is a written contract which is signed by both the Seller and the Buyer of the property. It should include the legal description of the property, the purchase price of the property, the full names of parties involved and any other terms of the sale.
The Purchase Agreement is usually subject to the condition that the Buyer is to obtain financing from a mortgage company under the terms and by a date specified in the Purchase Agreement. If these funds are not available by the last date for closing specified in the Purchase Agreement, the Purchase Agreement usually expires without further obligation to Seller or Buyer.
Because the Seller usually removes his property from the sales market during the “Purchase Agreement to Closing” period, it is important that the Buyer be pre-qualified for the purchase with the assistance of the Mortgage Company. Prequalifying a Buyer does not guarantee the Buyer will receive the loan, but is does help the Buyer shop for a home within the Buyer’s financial means.
Once the Purchase Agreement has been signed by both Seller and Buyer, the Buyer should give Hyde Title a copy of the Purchase Agreement for pre-loan processing.
Step 2: The Loan Process
The Buyer should immediately apply for a new loan according to the terms and conditions of the Purchase Agreement. The Mortgage Company begins the process by verifying credit, employment, banking and other financial information. An appraisal is ordered to establish the fair market value of the property being purchased in relation to the loan amount. After all the information has been received a loan package is prepared and submitted to the underwriter who determines whether the Buyer qualifies for the loan.
The Underwriter and/or a Loan Committee review the loan package. This process can be very complex as the Underwriter and/or the Loan Committee must ensure that all lending requirements are met and that state and federal laws have been adhered to.
Upon Loan Approval by Underwriting, the settlement terms and conditions are submitted to the Mortgage Loan Processor who prepares the closing package.
At this point the Seller usually orders a termite certificate and the Purchaser arranges for homeowners insurance and flood insurance (if required).
Step 3: The Closing
Before closing, an abstract of title is prepared and a Hyde Title attorney does the title examination necessary to write title insurance if required by the lender and/or requested by the Buyer. If the property is subject to liens or “clouds” on the title, they must be cancelled or cured.
The closing instructions issued by the Mortgage Company to Hyde Title are detailed guidelines governing how the sale and loan transaction must be documented; accordingly Hyde Title must prepare the closing documents with strict adherence to those instructions. The written disclosures, affidavits, and certifications, as well as the sale and loan documentation required vary widely depending on Lender and loan type.
After all documents have been prepared and all conditions of the Purchase Agreement have been met, the Buyer and the Seller meet at the offices of Hyde Title at a date and time coordinated through a Hyde Title escrow officer to transfer ownership of the property. That transfer of ownership (or title) is accomplished through execution of an Act of Sale by both Buyer and Seller. Funds are collected from the Buyer for down payment and settlement costs. Charges to the Seller are usually deducted from sale proceeds. The Buyer executes loan documentation which makes the loan proceeds available to consummate the transaction.
After the closing, Hyde Title updates the title and records the Act of Sale and the Act of Mortgage in the official records of the Clerk of Court for the parish where the property is located. A closed loan package is prepared and delivered to the Mortgage Company, who in turn ships the complete loan package to its investor. The Owner’s Title Insurance Policy is prepared by Hyde Title and mailed to the new property owner.
At Hyde Title, our staff of experienced specialists, closings are handled efficiently and professionally while minimizing client time and expense.