How are funds to be transferred, and what are the requirements for closing costs?
The transfer of funds and the handling of closing costs are critical aspects of the real estate closing process. Here's a general overview of how this typically works:
How Funds Are Transferred:
Wire Transfer: The most common method for transferring large sums of money, such as the down payment and closing costs, is via wire transfer. This is a direct transfer of funds from the buyer’s bank account (or in some cases, the lender’s account) to the escrow account managed by the title company or closing attorney.
Cashier’s Check: Some closings still accept cashier’s checks for the payment of closing costs and down payments. These are checks issued by a bank and guaranteed by the bank to have sufficient funds.
Personal Checks: In some cases, personal checks might be acceptable for smaller closing costs, but this is less common due to the risk of insufficient funds.
Credit and Debit Cards: These are generally not used for closing real estate transactions due to processing fees and limits on transaction amounts.
Requirements for Closing Costs:
Good Faith Estimate or Loan Estimate: Early in the home buying process, lenders provide an estimate of closing costs. For cash transactions, the title company or attorney may provide this.
Closing Disclosure: A few days before closing, the buyer receives a Closing Disclosure form, which provides the final details of the mortgage loan and the closing costs.
Review of Costs: Buyers should review these documents carefully, noting the total amount due at closing. This includes lender fees, title insurance, escrow fees, real estate commission, prorated property taxes, homeowners insurance, and any other agreed-upon costs.
Proof of Funds: Buyers may need to provide proof of funds for the amount they are responsible for at closing. This is particularly important if the buyer is making a large down payment.
Escrow Instructions: The title company or attorney handling the closing will provide instructions on how to wire funds or where to bring a cashier’s check.
Timing: Funds should be transferred to the designated escrow account before or on the day of closing to avoid any delays in the transaction.
Important Considerations:
Verification: Due to the risk of wire transfer fraud, it’s crucial to verify all wiring instructions directly with the title company or attorney by phone or in person, using a verified phone number.
Sufficient Funds: Buyers need to ensure they have sufficient funds in their account a few days before the transfer is scheduled.
Bank Notifications: For large wire transfers, it’s advisable to notify the bank in advance to ensure the transaction goes smoothly.
Closing Cost Assistance: In some cases, closing cost assistance may be part of the negotiated agreement between buyer and seller, or it might be available through lender programs or government grants.
Each real estate transaction may have unique requirements or steps, so it's important for both buyers and sellers to stay in close communication with their real estate agents, lenders, and closing agents to ensure they meet all necessary requirements and deadlines.
