Home Buyer's Guide

Closing on Your Loan

Closing your loan is an exciting and critical part of the home financing process. We understand how important it is for you to close on time. Your First Choice Loan Services Loan Originator and our supporting departments work together to make sure that you close on your schedule.

Preparing to Close

We can help you to prepare for your closing by ensuring that you have all the information you need to reap the rewards of your loan.

  • Collect all the documentation you need for closing your loan.
  • Check your credit history to ensure you’re in good standing. It may be a good idea to familiarize yourself with how your credit score is determined.
  • Verify that your insurance policies provide ample coverage for your home value, and ensure that your policy features First Choice Loan Services’ name as the payee for losses.
  • Consult with your First Choice Loan Services Loan Originator about locking in your interest rate to ensure you’re protected in the event that rates rise before your closing date.
  • If you are refinancing, review your current loan’s escrow account to understand if you have a surplus or deficiency of funds.
  • Avoid making big purchases, acquiring on additional debt or making large deposits or transfers not related to your loan. Credit inquiries and new accounts could impact your credit score or loan approval.
  • Bring a cashier’s check for the amount you need to your closing appointment.

Present at Closing

Different aspects influence who will attend your closing. Some of these determining factors include your property type, the state in which your property is located, and more. Depending on your circumstances, parties represented at your closing may include:

  • The buying and selling real estate professionals
  • The seller(s) (if you are buying a home)
  • The seller’s attorney (if they have one)
  • The builder’s representative (if a brand-new home)
  • Your attorney (if you have one)
  • The closing agent (a representative from the title company or a real estate attorney)
  • A notary public

Your closing may occur at the title company’s office, the First Choice Loan Services office, a real estate attorney’s office or elsewhere.

The Closing Process

While there are several moving parts involved in creating a smooth transaction, the team at First Choice Loan Services knows the process extremely well and has helped thousands of homebuyers encounter a seamless closing. We look forward to making your closing an easy and successful experience for everyone. Here are just a few things you can expect.

  1. Review and sign all loan documents, ensuring that you clearly understand each term to which you’re agreeing.
  2. Present a certified, wire or cashier’s check to cover your down payment, closing costs, prepaid interest, taxes and insurance.
  3. First Choice Loan Services will distribute funds to your closing agent.
  4. Based on your loan terms, you may be asked to set up a new escrow account with First Choice Loan Services so that there’s no risk of you missing payments on property taxes and homeowners insurance on top of your monthly mortgage payment.

Important Paperwork

There are three primary items to review and sign during closing: the Closing Disclosure, the Deed of Trust or Mortgage, and the Promissory Note.  The title company may also present separate settlement statements for the buyer and seller, in addition to the Closing Disclosure, to meet requirements of their regulator. The sub-total and totals should match between all disclosures of costs, charges and credits.

Closing Disclosure:

This is the itemized list of the final credits and charges for both you and the seller based on the terms of the contract. Each buyer or borrower must receive the Closing Disclosure at least three business days before the scheduled closing in order to have time to review the final figures and compare them to the Loan Estimate.

Deed of Trust or Mortgage:

These documents outline your agreement to a lien on your property, and provide security for repayment of your mortgage.

The Promissory Note:

The mortgage promissory note is a document that legally binds you to pay your lender according to the agreed terms, including mortgage payment dates and where the payments should be sent.

Closing Costs

A few days after submitting your loan application, you will receive a Loan Estimate which estimates your loan’s costs. Your closings costs generally can include discounts points, origination fees, notary fees, appraisal costs, recording fees, title insurance and more. Your First Choice Loan Services Loan Originator will be able to explain any noted costs that might be unclear to you.

You will receive a Closing Disclosure at least three business days before your scheduled close, which will outline your final closing cost, most of which were already noted on your Loan Estimate. Typically, closing costs can range from 2 to 7% of the home’s purchase price. As these funds will be due at the closing appointment, you’ll need to bring a certified or cashier’s check for the amount of the closing costs with you. While these costs may change from lender to lender, there are three basic categories:

Prepaid Expenses

Homeowner’s insurance, mortgage insurance and the costs to set up an escrow account are all included in the prepaid expenses. When a lender pays the annual insurance premiums and various taxes on the borrower’s behalf, an escrow account is established to collect the first year’s premiums. To pay for future premiums, an additional amount also is included. Prepaid expenses are challenging to predict fully as they vary based on the type of property and the time of the closing.

Discount Points

Equivalent to a percentage of the mortgage loan amount, a discount point aids in reducing the interest rate of the loan. These are entirely voluntary. Say, for example, a homebuyer obtains a mortgage amount of $150,000 at 8% interest. If a borrower opts in to pay 2 discount points, the interest rate could move down to 7.5%. Locking the lower interest rate through purchasing discount points would help save money in the mortgage payment every month; however, it would also necessitate $3,000 (or 2 points) at closing.  The discount paid and the amount it lowers the interest rate is not fixed—in the example here, 2% or 2 discount points lowered the rate by a half percent (.500%), but this is an example only.  The market rates vary every day and there are times when 2 points could lower the interest rate less and there are times when 2 points could lower the interest rate more.

Out-of-Pocket Expenses

Out-of-pocket expenses are comprised of fees for appraisals, attorneys, credit reports, deed recordings, home inspections, tax services, in addition to possible lender fees for origination, processing and administration, as well as other miscellaneous expenses, paid at the time of closing.

The day of closing can be overwhelming. Between the scheduling the appointment, signing all the papers and feeling the overall excitement of ending the home buying process, it can be a lot to manage. We want you to feel as knowledgeable and prepared as possible so that closing on your home is a joyful experience. First Choice Loan Services will be there with you every step of the way.