The Settlement Process

Settlement is the formal process that transfers title (legal ownership) of the real estate from the seller to the buyer. The settlement also gives the buyer's lender (if any) a lien against the property. (A lien grants a financial interest in the property to the lender until the loan is repaid.) The settlement process is governed by the Real Estate Settlement Procedures Act of 1974. RESPA requires that your lender give you a booklet which describes the settlement process in detail and advises you of your legal rights.

Pre-Settlement

Once your loan application is approved, somebody (chosen by either the buyer or the seller) will be designated to conduct the settlement. The settlement agent will order a survey of the property and a report on the status of the property's title. When these steps are completed, the settlement agent will prepare a Commitment for Title Insurance (sometimes called a Binder) and deliver it to your lender. The commitment informs your lender that, subject to certain approved exceptions, a title insurance policy will be issued for the lender at settlement to protect the lender's interests. All this preparation must be completed by the settlement date.

The Settlement

At settlement, the settlement agent will review the loan documents with you. The settlement agent's job is to: make sure all documents are properly signed and notarized; collect all funds required to pay settlement costs; and pay-off any pre-existing mortgages on the real estate. When everything is done and all the papers are signed, the seller gives to the buyer the keys to the house.

Post-Settlement

Following settlement, the settlement agent will record with the court all required documents, pay off any pre-existing mortgages, and make all disbursements required to complete the transaction. When all recording has been completed, the settlement agent will issue a Title Insurance Policy to your lender and, if you ordered it, one to you.

About Settlement Costs

Costs will vary depending on many factors, including: Location of the Property. Recordation and transfer taxes are payable to the state and local governments where the property is located. Each jurisdiction sets its own tax rates.

• Purchase Price and Amount of Financing. The purchase price and amount of financing will affect the recordation and transfer taxes and the title insurance premium.
• Loan Fees. Fees vary according to the lender you select and general economic conditions at the time you obtain your loan. Within three days of applying for your loan, your lender is required by RESPA to give you a Good Faith Estimate of the settlement costs you are likely to encounter.
  

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