What To Expect At Closing

When Tameka Jones and Demetrie Hylick were rushing to the meeting to close on their two-bedroom townhouse, the Baltimore couple was both excited and fearful. Engaged to be married in July 2007, the two were elated to buy their first home, but they were pressed for time because their apartment lease was expiring.

Several months earlier, Hylick, 24, who works as an assistant manager for a Sears in Baltimore, and Jones, 23, an account coordinator in Columbia, Maryland, decided to buy a home together when they realized mortgage payments could be about the same as their current rent. Encouraged by their real estate agent and friends, they applied for and discovered that they qualified for the first-time buyer program offered by the Association of Community Organizations for Reform Now, which advocates for better housing, schools, healthcare, and neighborhood safety (www.acorn.org). In November 2005, they completed ACORN’s one-on-one homebuying counseling sessions. By mid-January, they found their dream home.

With financing secured from Bank of America, they bid $116,000 on the townhouse they liked, and their offer was accepted. The closing was set for February 2006, but because their first-time home buyer program gave them access to nontraditional financing, setting up the financial paperwork took a bit longer than expected. The program allowed for 100% financing. Hylick and Jones would be responsible for $6,500 in closing costs, which they paid up front.

The closing was originally scheduled for mid-February, but the delay in completing their paperwork pushed the meeting back to Feb. 27 — one day before the Jones’ lease expired. Now they were praying nothing else would go wrong. “We lived in an apartment and had to be out at the end of February,” Jones recalls, “so we also had to schedule our closing around that same time or we were going to be homeless.”

At their closing, another problem arose, but the solution worked out in their favor. “With the ACORN program, we qualified for a loan with no PMI [private mortgage insurance] but the paperwork came to the closing with PMI calculated into the cost of the loan, which raised the closing costs an additional $1,800,” says Hylick. “We had already paid that out up front, so they had to write a check back to us to cover what we had overpaid.”

While the couple’s real estate agent caught the error and alerted Jones and Hylick just prior to the signing of the mortgage agreement, it could have gone unnoticed, costing thousands of dollars.

Jones and Hylick faced the challenges that a multitude of home buyers face at the closing (also called the settlement), the meeting in which the sale of property is finalized. Terms are agreed upon and documents are signed that legally transfer the property’s title from the seller to the buyer. Because there is a flood of paperwork to go through and financial figures often change during the meeting, many home buyers see the closing as a baffling and frustrating process. In the final part of our series on homeownership, we review