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What is a "closing"? What happens at the closing?

The “closing,” also called “settlement,” is when all the parties sign the documents and you become legally obligated under the terms of the transaction. If you are purchasing a home with loan proceeds, the closing of your loan (the time when your loan becomes final and the funds are disbursed) and the closing of your home purchase (typically, when ownership of your home is transferred to you) may happen at the same time.

Your closing may be conducted by your title insurance company, an escrow company, your lender, your attorney, the seller’s attorney, by mail or even on the internet. All the parties may sit around a table and sign all the documents at once, or the closing could take several weeks as the signatures of each party are collected separately. Regardless of who performs the settlement or where it occurs, there will be many important documents that you will need to sign.

Before you sign, make sure you carefully read and understand all the documents. Do not sign the loan documents if the loan is different from what you expected, if you cannot make the payments, or if you do not understand the loan terms. Be sure to understand whether your payments can increase over time.

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