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Caroline: (804) 448-5808
Fredericksburg: (540) 368-5501

General Closing Questions

What does a title company do?
A title company oversees the interests of all parties, consisting of buyers, sellers, lenders, real estate agents and coordinates the transfer of money and property at the time of closing. Prior to settlement the title company will research the ownership history of the property (which is called the title search) to determine that the title is free of any liens or claims. At the settlement table, the title company collects and distributes funds from the transaction, transfers ownership of the property, and issues title insurance.

What are the functions performed and services provided by the closing agent?

It is customary for the closing agent to receive a "title order" from a real estate agent, a loan officer, a purchaser, or a refinancing owner in preparation of a closing. The closing agent will then order a title search, a location survey (if required), payoff statements, and real estate tax information in preparation of closing. Within a few weeks prior to closing, the closing agent will schedule a closing date with the lender and the parties involved, as well as, clear title and issue title insurance commitments to the respective parties. The day before closing or on the day of closing, the lender will provide final loan instructions to the closing agent along with the lender documentation. Upon receipt of these items, the closing agent will prepare the final HUD-I Settlement Statement and conduct closing with the parties. Generally, the actual closing involves an explanation of the documentation by the closing agent and the acquiring of signatures which takes approximately one hour. In some cases, there may be subsequent adjustments to the HUD-I Settlement Statement or other documentation that will require a longer closing time. At the time of closing or shortly thereafter, the lender will remit funds to the closing agent's escrow account for disbursement.
 

Who does the settlement company represent?
The closing agent represents all parties in a transaction: the buyer, seller and lender. In essence, the agent represents the process and/or transaction and ensures that all elements and terms are met.
 
What factors should I consider in choosing a closing agent?
While the functions performed and services provided by the closing agent include those matters previously described, the most important role played by the closing agent is the issuance of the title insurance policy. Without the closing agent's ability to issue a title insurance policy, your transaction could not proceed to closing. Ultimately, the most vital function of the closing agent is issuing a title insurance policy, and since title insurance policies are all substantively equal, the closing agent is simply providing a commodity necessary to complete the transaction.
 
Who chooses the settlement company?
The person refinancing or purchasing a property selects the closing agent. Sometimes homebuilders or lenders suggest an affiliated firm and offer to pay associated fees for using that company. But it's always a matter of choice.
 
What happens and when?
Once the title order is placed with any of our offices, a title abstract is ordered as well as a location survey where required. The title company coordinates between the borrower/purchaser, the lender and realtor or builders involved in the transaction. The title company obtains mortgage payoff amounts as well as all pertinent tax, water and homeowners association figures. We prepare the title insurance commitment, the deed, settlement sheet and in many cases loan documents. We conduct the closing, collect and disburse all funds to the appropriate parties, record all necessary documents including deeds, mortgages and mortgage releases in the appropriate jurisdictions. Once all documents have been recorded in the County, a final title policy is issued.

 

What documents are needed for a settlement?
We'll let you know the specifics for your closing but in most instances you'll need to provide:

For a Sale:

  • Payoff information
  • Funds required at closing
  • Buyers must provide a copy of the sales contract and related written materials for a refinance:
  • A copy of your owner's title policy if you have purchased the property in the last 10 years (with a copy issued in the past 10 years, STA can save you costs for lender's title insurance required by your new lender).
  • The most recent tax and water bills
  • Your survey and a statement for your existing mortgage(s) that will be paid
  • Copies of statements from which proceeds will be used to pay.
     
What is a HUD Settlement Statement (HUD-1)?
This is a summary of the financial portion of the real estate transaction. The HUD will list the purchase price, loan amount, closing costs for both buyer and seller and show all pro-rations and sums to be disbursed by the title company to all parties.
 
What fees and costs should I expect to pay the closing agent?
Variable Fees and Costs - Both the types and amounts of these fees and costs will vary widely among closing agents and attorneys and include such items as:
  • A settlement/closing fee
  • A title search/abstract fee
  • A title insurance premium
  • A title insurance binder fee
  • A location survey fee
  • A courier/overnight fee
  • A notary fee
  • A document preparation fee, etc.

Non-Variable Costs - These costs include the transfer and recordation taxes charged by the State of Virginia and the respective county along with the costs charged by the county clerk's office for recording of the Deed, Deed of Trust (Mortgage), and other documents which require recordation. Unless otherwise negotiated in the sales contract, the standard purchase transaction will require that the purchaser(s) pay the Deed Tax ($2.50 per $1,000.00 of purchase price) and the Trust Tax ($2.50 per $1,000.00 of loan amount) . In a residential refinance transaction that does not include a transfer of ownership, only the Trust Tax will be charged based on the new loan amount. If the new lender is the same lender that is being paid off at closing, the borrower will only be required to pay the Trust Tax on the difference between the new loan amount and the amount of the existing loan being paid off at closing.
 

Can't closings be simplified with the use of computers?
The process is more accurate, timely and secure than ever thanks to advanced technologies. At STA we offer digital preparation, delivery and storage of closing documents. Our advanced document management system is accurate, flexible, efficient and immediate. We also are capable of handling high-volume electronic documentation. Alas, at the end of the day it is still necessary to meet for about an hour to review and sign the documents.
 
Is a title examination sufficient without the need for title insurance?
No. A title examination is only as good as the land records. Should a filing error happen, if someone perpetrates a fraud, if an estate is mishandled, a title examination would not expose those problems. The title insurance protects you, even thought the title examination did not and could not disclose the problem.
 
Am I required to purchase title insurance?
Most lenders will require that you purchase a lender's title Insurance policy. This protects their investments in your property. You are not required to purchase an owner's policy; however, your one-time payment will protect your property for as long as you own it.
 
Do title companies charge different rates for title insurance policies?
Title Insurance rates are set by state insurance commissions and are based on the purchase price of your property (owner's policy) and the loan amount (lender's policy).
 
What is a construction loan title insurance policy?
A construction loan consists of short term financing of real estate construction. Construction loans are generally disbursed in installments as the construction on the property progresses. A construction loan is used to finance the costs of building a new structure on real property. It is a high-risk loan. The most important risk to the title insurer is the risk that the priority of the construction loan's mortgage will be lost to mechanics' liens.
 
What other types of insurance will I need?
Your lender will require that you purchase homeowner's or hazard insurance, which protects you and the lender from loss in the event that the house is damaged or destroyed, such as by fire. Generally, coverage must be equal to at least the replacement costs of the property. Most home buyers purchase a homeowner's package of insurance that includes coverage for personal liability (which covers you if someone is injured on your property), personal property coverage (which covers loss and damage to personal property due to theft and other events), and dwelling coverage (which covers you for fire, theft, water damage and other hazards to your actual house). If you live near a body of water, you may also want to get flood insurance as part of your homeowner's protection. Lenders typically want the first year's premium to be paid at or before closing. Your lender may add the insurance cost to your monthly mortgage payments and keep this portion of your payments in a reserve called an escrow account, paying your insurance premiums when due each year out of the account. We encourage you to discuss any questions about required or recommended insurance with your lender. STA's subsidiary, STA Insurance Services, LLC offers homeowner's insurance, and will work with STA to make sure that all of your required insurance is in place before closing.
 
Why do I need a location survey?
Location surveys are necessary on all financed purchases. The title company must order the survey through a licensed Surveyor in advance of the settlement to make sure there are no discrepancies or structures on the property which appear to encroach over building restriction lines, property lines, or drainage and utility easements. Boundary surveys are much more involved, more time consuming and much more expensive. They are not required by banks unless the property is being rezoned or subdivided, or there's a boundary problem.

If you are refinancing a loan and have a prior location survey, and have not changed anything or added any improvements, then the old survey is sufficient as long as you sign an affidavit at closing. Even if you can't find your survey, we can still insure the title to the lender if you sign the affidavit. However, some lenders may require that you have a new survey. In that case, we will contact you about ordering one.
 

Do I have to get a new survey on my property when refinancing? Why?
You only have to get a new survey on the property if improvements have been made since the last survey was completed. A new survey must be provided after improvements have been made on the property to reflect a new footprint of the property and to properly insure your investment and your lender's collateral.

Unlike refinances, all purchases require a new survey.

Should I schedule my closing before the end of the year for tax reasons?
If you have the opportunity to schedule your closing on either side of New Year's Day, you should carefully consider your individual financial and tax situation. If you schedule it on or before December 31, and you pay your points and prepay your first mortgage payment, you may be able to deduct all of these costs on your tax return for the year of the closing. As always, consult with your tax or accounting professional.
Can the seller credit the buyer for home inspection items?
Some lenders will allow credits for home inspection items, but in most cases the lender will want to simply give a closing credit for the amount of the item(s). For a lender to allow credits for specific home inspection items is somewhat inconsistent with the lender's appraisal which generally states that the home is in good condition and good repair.
 
What if the seller credit exceeds the amount of closing costs?
When it comes to seller credits, different lenders will allow different credits to be shown, but lenders will generally not allow seller credits that exceed the amount of closing costs.

Why can't 'pre-paids' be a part of the seller credit on all loans?

Some lenders allow 'pre-paids' and some do not; we advise you to check with your lender directly. In general, even lenders who allow them will only allow them up to the dollar amount of closing costs, not over.
 

What are the Seller(s) costs?
The costs to the seller(s) are deducted from the proceeds of the sale. Examples of the costs are as provided in the Contract of Sale, transfer tax, commission, mortgage payoffs, etc.
 
What are the Purchaser(s) responsibilities and costs?
The purchaser(s) are responsible for delivering to the closing a cashiers or certified check and policy for homeowners insurance. The costs associated with the buyer include the recording of closing documents, mortgage closing costs and the balance of sale between buyer and seller. The balance of sale costs is itemized in the Closing Statement prepared by STA Title & Escrow, Inc. The mortgage costs must be obtained from the purchaser(s) mortgage company.
 
Closing protection letters: What are they and why do lenders request them?
Many lenders routinely request closing protection letters. A closing protection letter, sometimes referred to as an insured closing letter, is a document issued by title insurance underwriters that sets forth an underwriter's responsibility for negligence, fraud and errors in closings performed by agents and approved attorneys. It indemnifies the Lender against loss or damage arising from a breach of certain fiduciary duties owed by the closing agent to the parties to the transaction. This document is necessary because the agency /principal relationship between an underwriter and a policy issuing agent or approved attorney is limited to the issuance of a policy and does not extend to escrow functions.
 
What is pro-ration of proerty taxes?
This is the process of charging either the buyer or seller for their share of real estate taxes owed on the property for their respective time of ownership. Taxes are said to be "pro-rated" back or forward to the due date of the property taxes.
What is pre-paid interest?
This is interest due from the date of a loan closing to the first day of the following month. Most loans require payments to be due on the first day of the month. Each monthly payment reflects the principal and interest due on the loan for the previous month. A loan closing on the 20th day of the month will require an interest adjustment through the 1st day of the following month. The first payment will then be due on the 1st day of the month following. Interest adjustment is considered a settlement charge and will be disclosed on the HUD.
Why can't the sales proceess or the commission check be disbursed at the table?
State statutes prohibit us from disbursing funds from the transaction until after all title documents (deeds or deeds of trust) have been recorded in the local Land Records. Recordation is not accomplished until such time as the settlement is complete, in other words, until all required funds are received by STA for the transaction, and all documents are executed by the parties according to the lender's instructions. Once settlement is complete, the title documents will be sent for recordation, and upon verification, we are permitted to disburse funds. The recordation process can be time consuming, and it varies from jurisdiction to jurisdiction. Additionally, the recordation of documents from settlements conducted at the end of the month or during the holidays may take significantly longer due to volume.
What funds are considered "available funds"?
Cash, received wired funds, and a cashier's check or certified check that is issued to STA Title & Escrow, Inc. are considered "available funds" on the day of deposit.
 
What are the most common hindrances to a closing happening on time?
The most common hindrances to a closing happening on time are no updated survey, no homeowner's hazard insurance, and no pest inspection. These must be executed or purchased prior to closing so that all information is accurate and the property can be insured without any abnormal exceptions.

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