MORTGAGE MATTERS

5 min read

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Aug 2017

Who’s Responsible for What in the Mortgage Process

Are you closing on your first home and wondering what you’re responsible for? The amount of items on the checklist to go through when buying a home can be pretty daunting. Who pays for what? What if I forget something and arrive to the closing unprepared? Where do my responsibilities lie as a future homeowner? Where does my lender come in to help? What’s my real estate agent responsible for? Take a deep breath. We’ve broken it down so you’ll be prepared and confident on closing day. Here’s a list of items you might be wondering about, including who’s responsible.

LENDER

The appraisal

Home appraisals are an important part of any home buying adventure. They’re written estimates of your proposed property’s value, used to inform everyone involved (the buyer, seller, and lender). This helps you and your lender ensure you’re not overpaying for your home.

Your lender will only be able to approve a mortgage that is equal to or less than the appraised value of the home.

Almost always, when a property is appraised in connection with a loan, the appraiser is selected by the lender, but you’ll be responsible for paying the appraisal fee.

Title search and insurance

In real estate business and law, a title search, also know as a property title search, is the process of searching public records that affect the title to a property. Simply put, a title is just the legal way of saying you own the right to something. Once a sales contract is signed, your lender will order the title search for you. They will pick an unbiased, third party title company, who will perform the title search, usually through searching the county’s records in the county that the home is in, but a homebuyer can pick their own title company if they choose. The documents found are analyzed, and the legal homeowner is verified. They’ll also determine if there’s any issues or debts against the property, such as liens, wills, divorce settlements, etc. Additionally, your lender will work with you to order title insurance, which protects you and the lender if issues or debts do arise in the future; also known as title defects.

Scheduling closing (with a title company)

Closing is the final step before you’re officially a homeowner. Typically, the closing timeline is agreed upon during the negotiation phase of the home buying process, and is usually scheduled for several weeks after your the offer is formally accepted. How long it takes to close will also vary lender by lender. Delays can also be caused by things like home inspection, title, or appraisal issues. At the closing, the ownership of the property is transferred to the buyer from the seller. Closings are typically a collective effort scheduled by your your settlement attorney/agent and lender. They’ll schedule the closing for a time that is convenient for both you and your real estate agent, so that all may attend.

Borrower (you)

Choose your lender and agent

Who you choose as a real estate professional and your mortgage lender is completely your choice. While your agent may recommend a particular lender, or vice versa, you should be aware that you’re not obligated to work with their recommendation. You want to find an agent and lender who are knowledgeable, honest, reputable, and accessible. Feel free to ask friends or family for referrals, and check reviews online.

Tip: It’s best to start with a mortgage lender so you know exactly how much home you can afford before you even start house hunting.

Howeowners insurance

You’ll be required to purchase homeowners insurance to protect your the property’s structure (and its contents) against loss from fire and other hazards. Additionally, lenders require homeowners insurance to protect their interest in the property. If, unfortunately, your home were ever destroyed, the mortgage would lose its value. Therefore, you lender requires the insurance as collateral against the home. You’ll need to secure your homeowner’s insurance prior to closing. Who you use and the extent of coverage are your decisions as well. The lender may require a minimum coverage to cover your mortgage.

Flood insurance

Not surprisingly, flood insurance was created to cover losses to your property caused by flooding. Homeowners insurance policies typically don’t not cover flooding. Usually, flood insurance is optional, unless you’re in a flood zone area. If you’re in a high risk flood area, your mortgage lender will most likely require you to get flood insurance. Even if your property is in a moderate to low risk area, a lender may still require it. So be sure to check with your lender to see if your proposed home will require it. You’ll need to get this before your closing date, and send proof of the coverage to your lender.

Scheduling utilities

It’s time to get lights on and water running at your new place. By the time of your closing date, you should transfer utilities from the seller’s name to your own. This is when it all really starts to feel real.

Utility providers can include your phone/internet/cable provider, electric company, natural gas company, water company, and any others that are relevant to you. To stay on top of expenses, you may be able to ask the sellers about their average costs for electricity, water, gas, etc. so you know what to expect as your bills start coming in.

Real estate agent

Home inspection

To save (or prepare) yourself from any potential, big ticket item issues, a home inspection is an examination of the condition of your proposed house, including its structure, electrical, venting, heating/air, appliances and roof. They’re conducted by a professional home inspector. Your real estate agent traditionally schedules the inspection on your behalf, after you sign the contract and put down your escrow deposit. These are done early so that there’s time allowed for repairs or contract negotiations (if needed).

Termite/moisture inspection

Termite/moisture inspections are done by individuals licensed to perform inspections of homes to determine damage or possibility of damage from bugs, insects,termites, or dry rot conditions. They’re check for damages to the foundation, doors, roof, etc., which could make the wood unstable. Most lenders require a pest inspection, but your real estate agent will likely schedule this for you. Your sales contract will state who’s responsible for paying for the termite and moisture inspections. Keep in mind, an inspection can’t reveal things that can’t be seen.

Schedule final walk-through

Just before closing, you and your agent will be able to take a final walk-through of your future home. Some buyers even choose to bring their inspector along as well. This is your final opportunity to ensure all agreed upon repairs have been made. Once your agent knows the details of your closing, they’ll work with you to schedule the walk-through. Buying a home is likely one of the largest purchases you’ll ever make, but getting a mortgage doesn’t have to be overwhelming or complicated. During the process, it can be hard to distinguish who’s responsible for what in the mortgage process, but your agent and lender should help guide you through the process.

Frequently Asked Questions

Chances are, if you're wondering about it, someone else has too. Here are answers to some of the questions we hear most often.

Who orders the home appraisal when buying a house?
The lender typically selects and orders the appraiser as part of the mortgage process. However, the borrower is generally responsible for paying the appraisal fee, which is often collected at the time of application or at closing. The appraiser is required to be independent and unbiased, meaning neither the buyer nor the seller chooses who performs the appraisal. Your lender can tell you what to expect for the appraisal fee based on the property type and your loan program.
Who is responsible for ordering the title search?
Your lender will typically order the title search once a sales contract is signed. They will select an independent title company to search the public records and verify legal ownership of the property, identify any outstanding liens, easements, or other claims, and confirm the seller has the right to transfer ownership. In some states, the borrower may have the option to choose their own title company. Your settlement agent or closing attorney can walk you through how this works in your state, as title and closing requirements can vary in Virginia, North Carolina, Florida, and Georgia.
What is the borrower responsible for in the mortgage process?
As the borrower, your primary responsibilities include choosing your lender and real estate agent, providing accurate financial documentation throughout the loan process, securing homeowners insurance before closing, arranging flood insurance if the property is in a flood zone or if your lender requires it, and setting up utilities in your name before or shortly after closing. You are also responsible for attending the closing and reviewing and signing the final loan documents. Your mortgage banker will walk you through a complete checklist specific to your loan program and situation.
Who schedules the closing?
The closing is typically scheduled through a coordinated effort between the lender, the settlement agent or closing attorney, and the real estate agents involved. The closing timeline is usually agreed upon during the negotiation phase and is scheduled several weeks after the offer is formally accepted. How quickly a lender can close varies by company and loan type. Atlantic Bay Mortgage Group is committed to on-time closings and will work with your agent and settlement team to coordinate a closing date that works for everyone involved.
Who pays for the home inspection?
In most cases, the buyer pays for the home inspection, though who specifically pays can be negotiated as part of the sales contract. Your real estate agent typically schedules the inspection on your behalf after the contract is signed and the escrow deposit is made. The inspection is generally conducted early in the process to allow time for repair negotiations or contract adjustments if significant issues are found. The inspector's fee varies based on the size and location of the property.
Is homeowners insurance required to get a mortgage?
Yes, lenders require borrowers to have homeowners insurance in place before closing. This protects both the borrower and the lender's financial interest in the property. The lender may require a minimum level of coverage based on the loan amount. You are responsible for selecting your insurance provider and policy, and for providing proof of coverage to your lender before closing. Premiums and coverage requirements can vary depending on the property location and loan program, so it is worth shopping policies early in the process.
Do I need flood insurance if I am buying a home?
Flood insurance is required if the property is located in a high-risk flood zone as designated by FEMA. If your property falls in a moderate- or low-risk area, your lender may still require flood insurance depending on the loan type and property specifics. Standard homeowners insurance policies generally do not cover flood damage, so if you are purchasing in a coastal market like Virginia Beach or in areas of Florida or Georgia with flood exposure, it is important to check flood zone status early in your search. Your lender can confirm whether flood insurance will be required for the home you are purchasing.
What should I do before closing day to be prepared?
In the days leading up to closing, confirm that your homeowners insurance and any required flood insurance are in place and that proof has been sent to your lender. Arrange to transfer utilities into your name effective on or around the closing date. Review your Closing Disclosure, which your lender is required to provide at least three business days before closing, and flag any questions for your mortgage banker before you arrive. Confirm the amount you will need to bring to closing, which should be in the form of a wire transfer or cashier's check as specified by your settlement agent. Bring a valid government-issued photo ID. Your mortgage banker and real estate agent will also walk you through any additional steps specific to your situation and market.

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The views and statements expressed are deemed reliable as of the publish date indicated and may not be accurate or reliable at any future date. The views and statements provided are those of the author. Discussions regarding any financial information provided are not intended as individual recommendations and do not reflect the views or advice of Atlantic Bay Mortgage Group, L.L.C. The views expressed are subject to change at any time in response to changing circumstances in the market. *For refinances, the total finance charges may be higher over the life of the loan. Atlantic Bay Mortgage Group, L.L.C. disclaims any obligation to publicly update or revise any views expressed or information given. Loan programs may change at any time with or without notice. Information deemed reliable but not guaranteed. All loans subject to income verification, credit approval and property appraisal. Not a commitment to lend. Atlantic Bay Mortgage Group, L.L.C. NMLS #72043 (nmlsconsumeraccess.org) is an Equal Housing Lender. Located at 600 Lynnhaven Parkway Suite 100 Virginia Beach, VA 23452.