Buying A House - Surprises At the Settlement Table
When you’re buying a house, sometimes things go great, and sometimes they don’t. This particular deal I’m going to tell you about started out just as you’d expect. The buyer and the seller signed a sales contract. It shows the sales price, the deposit, the amount of the mortgage the buyer will apply for, and it shows that the sellers will pay 6% the purchase price as settlement help to the buyer. The mortgage company of course received a copy of the contract at the time the buyer applied for the mortgage.
The buyer hired me to be their Delaware setttlement attorney. The mortgage company eventually approved the buyer’s application, and everybody started getting things ready for settlement. On the day of settlement, approximately 1 hour before the time set aside for the closing, the mortgage company sent out their closing instructions and documents. We prepared the HUD-1 in accordance with those instructions, and we sent the HUD-1 to the mortgage company for approval. The buyer and the sellers show up for the closing, and we start going over the figures. The buyer takes a peak at the bottom line - you know, the one that shows how much the buyer has to pay - and it shows that the buyer is getting back $2,500 (half of her deposit). Based on the settlement help from the sellers, this is exactly what the buyer was expecting.
Then we get the call. According to the mortgage company, the kind of mortgage they approved requires the buyer to pay at least 3.5% of the purchase price out of her own pocket. The deposit she paid and the application fee get counted as a part of the 3.5%, but a lot more is required. Once the calculations are done, it turned out that instead of getting back $2,500, the buyer had to pay $3,000. In order to accomplish this, the settlement help from the sellers had to be reduced significantly.
The buyer was shocked and upset. In my next article, I’ll discuss what happened next.
