Closing On The Sale Of Your Connecticut Home
Seminar: Working with your attorney, title company, appraiser, Insurance and shopping your maintenance contractors.
The guide below will help familiarize yourself with the closing customs in Connecticut.
Much of Connecticut closing practice is done in accordance with the “custom of the bar” in the area in which the property is located. That custom, in some cases, has been formalized and published by the local or county bar association. When available, that information has been incorporated into this guide. If an area does not have formalized and/or published customs, but relies on the customs of another area, we have included a statement “See….County Customs.” Otherwise, the information contained here was obtained from practicing real estate attorneys, secretaries and paralegals. We extend our grateful thanks to those who took time from their very busy schedules to respond to our questions and who went out of their way to verify the accuracy of the information given. https://www.catic.com/Consumers/Resources/ClosingCustomsCT.aspx
What does it cost a buyer to close on a home in Connecticut? Here are some things to consider.
- Loan origination fees
- Points, or loan discount fees you pay to receive a lower interest rate
- Appraisal fee
- Credit report
- Private mortgage insurance premium
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage
- Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
- Deed recording fees
- Title insurance policy premiums
- Inspection fees—building inspection, termites, etc.
- Notary fees
- Prorations for your share of costs such as utility bills and property taxes.
What fees can you expect at closing?
Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose. Here is a list of fees that may be included in closing. The list is inclusive of fees you may see, but it’s not likely that your loan will include all of the fees listed here.
- Application Fee:This fee covers the cost for the lender to process your application. Before submitting an application, ask your lender what this fee covers. It can often include things like a credit check for your credit score or appraisal as well. Not all lenders charge an application fee, and it can often be negotiated.
- Appraisal: This is paid to the appraisal company to confirm the fair market value of the home.
- Attorney Fee: This pays for an attorney to review the closing documents on behalf of the buyer or the lender. This is not required in all states.
- Closing Fee or Escrow Fee: This is paid to the title company, escrow company or attorney for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase. Some states require a real estate attorney be present at every closing.
- Courier Fee: This covers the cost of transporting documents to complete the loan transaction as quickly as possible.
- Credit Report: A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.
- Escrow Deposit for Property Taxes & Mortgage Insurance: Often you are asked to put down two months of property tax and mortgage insurance payments at closing.
- FHA Up-Front Mortgage Insurance Premium (UPMIP): If you have an FHA loan, you’ll be required to pay the UPMIP of 1.75% of the base loan amount. You are also able to roll this into the cost of the loan if you prefer.
- Flood Determinationor Life of Loan Coverage: This is paid to a third party to determine if the property is located in a flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance. The insurance, of course, is paid separately.
- Home Inspection: You will likely get your own home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.
- Home Owners Association Transfer Fees: The Seller will pay for this transfer which will show that the dues are paid current, what the dues are, a copy of the association financial statements, minutes and notices. The buyer should review these documents to determine if the Association has enough reserves in place to avert future special assessments, check to see if there are special assessments, legal action, or any other items that might be of concern. Also included will be Association by-laws, rules and regulations and CC & Rs.
- Homeowners’ Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.
- Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is a valid lien, and it protects the lender if there is a problem with the title. Similar to the title search, but always a separate line item.
- Lead-Based Paint Inspection:Covers the cost of evaluating lead-based paint risk.
- Loan Discount Points:“Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.
- Owner’s Policy Title Insurance: This is an insurance policy that protects you in the event someone challenges your ownership of the home. It is usually optional.
- Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
- Pest Inspection: This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans. Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.
- Prepaid Interest:Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
- Private Mortgage Insurance (PMI): If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.
- Property Tax: Typically, lenders will want any taxes due within 60 days of purchase by the loan servicer to be paid at closing.
- Recording Fees: A fee charged by your local recording office, usually city or county, for the recording of public land records.
- Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states.
- Title Company Title Search or Exam Fee: This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property.
- Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
- Underwriting Fee: This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.
- VA Funding Fee: If you have a VA loan, you may be required to pay a VA funding fee at closing (or you can roll this fee into the cost of the loan if you prefer). This is a percentage of the loan amount that the VA assesses to fund the VA home loan program, however some borrowers are exempt from this fee. The percentage depends on your type of service and the amount of your down payment.
The process of closing on the purchase of your home
If you want to ensure that the house for which your purchase offer has been accepted becomes available to you within a short time, you need to avoid all the problems which can possibly delay the house closing process. Here are the details of the home closing process and the factors which can stall the closing procedure:
Steps in the escrow closing process:
- The terms of the purchase agreement need to be met by the buyer as well as the seller.
- Earnest money needs to be deposited by the buyer to the seller.
- Home inspection is conducted officially. This process can also be waived.
- The seller needs to provide documentation of the title deed, home warranty, pest inspection, certification of the roof, receipt of beneficiary demand and repair requests.
- The lender needs to do the property appraisal and submit the report.
- Proof of the buyer’s fulfillment of loan conditions needs to be provided along with the loan approval document by the lender.
- The buyer and seller need to sign the instructions of the escrow.
- The seller then submits the deed which is signed as well as notarized.
- Loan documents need to be signed by the buyer.
- The lender needs to make the payment of the loan amount in the buyer’s account
- After receiving the loan from the lender, the buyer needs to make the down payment and pay the closing fee.
Only when all the steps are carried out formally, the closing process is considered over.
Delays in the closing process
– Lack of pre-approval for loan
– Low credit score of the buyer
– Previous loans taken by the buyer which have not been completely cleared
– Errors in credit report submitted by the buyer
– Inadequate insurance information
– Low appraisal or a second appraisal demanded by the underwriter which does not match with the first one
The main point to remember is that unless a buyer is paying the whole value of the property himself, the buyer’s lender determines the speed with which the deal is closed. Even if the buyer and the seller agree on a closing date, the lender can cite reasons for not being able to perform his function within that time limit. These delays can be avoided if the buyer is more thorough while inspecting his credit report and plans for a loan ahead of time.
If you are in the middle of a property deal, you need to keep in mind these tips to accelerate the house closing procedure for your property purchase.