Borrower’s FAQ

What is a closing?
A Closing is the final ceremony where documents are signed to transfer the title to real property from a seller to a buyer and any loan documents associated with a buyer’s loan or mortgage are executed, if the buyer is not paying cash. The Closing is typically held at the Closing Attorney’s office. Once the necessary documents are prepared, signed and recorded at the local courthouse, the title is considered transferred to the new homeowner. In the case of a refinance, the ceremony includes only signing the loan documents.

What do I need to bring to Closing?
You should bring two forms of identification, including at least one with a photo such as a driver’s license or a passport. You also need to bring a cashier’s check or certified funds payable to the closing attorney for the balance due at closing or wire the balance to the closing attorney prior to closing. You cannot write a personal check at closing without the prior approval of the closing attorney. If you are using an approved Power of Attorney, you must bring the original to closing. You should also check with your lender and the closing attorney prior to closing to make sure there are not any other documents required at closing.

How long will the Closing last?
On a typical residential settlement the closing should take approximately one hour if the buyer is signing mortgage papers. If it is a cash transaction the settlement may be less than 30 minutes.

Do I have to attend the Closing?
It is usually expected that all parties attend the closing so that any problems that may occur are appropriately addressed at closing. If you cannot attend closing you should discuss using a Power of Attorney with your lender and the closing attorney. The use and form of a Power of Attorney must be approved by your lender and the closing attorney. In some situations, it may be necessary to email or overnight the documents and must be discussed with the lender and closing attorney well in advance of closing.

What is Title Insurance and do I need it?
Title Insurance protects against problems or defects in the title to your property. Mortgage lenders require all borrowers to buy “Mortgagee” title insurance that protects the lender for the full amount of the mortgage in case of title problems or defects (such as cancelled mortgages, forgeries, etc.). An “Owners” title policy protects the owner’s equity. Premiums are set by the Insurance Department and vary depending upon the amount of coverage required. It is paid at closing and its is paid only once. However, upon refinancing, the new lender will again require a new mortgagee policy (to be sure there have been no intervening encumbrances). Learn more.

What is APR?
APR stands for Annual Percentage Rate. It is intended to educate consumers, i.e. borrowers, as to the true cost of a loan. The annual percentage rate takes into account all the finance charges imposed by a lender so that borrowers can compare which rate is a better rate for them. Every Lender must inform a borrower what the APR of the transaction is. Once that is done, a borrower can compare the APR from one Lender with the APR of the other Lender, and the lower APR is the better and cheaper rate.

What costs does the buyer pay at closing?
The Georgia Association of Realtors standard contract provides that the buyer shall pay Georgia property transfer tax ($1.00 per thousand of the sales price), attorney’s fees, title search, and all closing cost, tax service charges, recording cost, courier fees, document preparation fees, underwriting fees, and all other cost to close the transaction, which would include loan origination fee, Georgia mortgage tax (intangible tax), and title insurance. Additionally, the buyer is required to pay interim (prepaid) interest from the date of closing to the first day of the next month, one year hazard insurance and flood insurance, if required, and an amount necessary to establish an escrow account. The lender is required to furnish the buyer with a Good Faith Estimate (GFE) of all of the cost involved in the transaction. The amount of closing cost and prepaid items mentioned above is reduced at closing by any amount the seller agrees to pay towards closing. Other contracts may require the buyer or the seller to pay all closing cost and/or prepaids. It is important to make sure you understand your purchase contract before signing.

What cost does the seller pay at costing?
The Georgia Association of Realtors standard contract provides that the seller shall pay up to an agreed amount to be used by the buyer as a contribution towards all closing cost and prepaid items mentioned above. This limits the amount the seller shall be obligated to pay at closing to the exact amount agreed to by the seller. Additionally, the seller generally pays for the Real Estate Commission, any past due taxes or association dues and prorated amount toward the current years taxes and dues. In other contracts, the seller may agree to pay all, none or a portion of the closing cost and/or prepaid items. The amount he seller pays towards closing costs is completely negotiable between the parties, subject only to any lender restrictions. You should check with your lender before signing a contract to verify the amount of closing cost to be paid by the seller is permissible by the lender.

What is private mortgage insurance and do I need it?
This type of insurance protects the Lender against lawsuit due to default by the Borrower. This is generally required whenever the loan amount exceeds 80% of the fair market value of the property being purchased. It may also be required in other instances. The requirement for this insurance may be waived after the loan has been reduced to a specific level but typically there is a mandatory waiting period requirement even when the loan-to-value ratio is less than 80%. You should discuss private mortgage insurance in detail with your lender upon loan application.

What is flood insurance?
This is a special type of insurance that covers future losses due to flooding which losses are not covered by most homeowner’s policies. If your property is located in an area requiring the purchase of flood hazard insurance, the Lender will ask that you demonstrate that you have this insurance and that you have added its name as a loss payee as part of the terms of the financing. As with homeowner’s insurance, flood insurance covers the risk of any loss due to flooding that may occur during the year for which the premium has been paid. A premium is payable each year.

What is hazard insurance?
This type of insurance, commonly referred to as a homeowner’s policy or landlord’s policy, protects you, the insured, against loss which could be sustained in the future as a result of fire, theft or other mishap. Because a serious loss could reduce the value of the property below the amount owed to the Lender, the Lender has the right to be added to your homeowner’s policy as a party who may be entitled to receive a portion of the proceeds in the event of a loss (“loss payee”).