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The Settlement Process


Settlement is the last step in the home buying process, the procedure by which the title to a property passes from the seller to the buyer.  The settlement agency conducts the closing and works with a title company to prepare the documents needed as a condition of the loan.

The settlement agency is a neutral party representing the contract, with the responsibility to fulfill the terms of the contract relative to transferring title. If there is financing involved, the settlement agency also stands in a fiduciary relationship to the lender. 

The settlement agency does the following to prepare for closing:

  1. Obtains an abstract of title which is a statement based upon the public records that shows the chronological order of the history of the title.
  2. Orders a survey (a physical inspection to determine the house location on the property).
  3. Conducts title examination. Required as a condition of the title insurance company and based upon the exam, a commitment for title insurance is prepared, thus allowing the lender to release the loan package to the settlement agency.
  4. Reviews loan package which contains the documents to be signed by the buyer at closing. The package includes a breakdown of the lender’s charges, and loan instructions for the settlement company to follow.
  5. Prepares the settlement statement, the HUD1, required by the U.S. Dept. of Housing & Urban Development which provides the buyer & seller with a complete statement of credits and charges based on the contract terms. The settlement statement is signed at closing along with the deed and deed of trust and any other lender documents for the buyer. When these documents are signed, the borrowers become the new owners of the property.
Some settlement costs, such as homeowner’s insurance, private mortgage insurance, or points can be more expensive if your credit rating is low. Knowing your credit score can help you understand how lenders will evaluate your applic
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