The home purchase process can feel long and overwhelming for many buyers. The first person a buyer consults with in this process is either their agent or their Loan Officer (LO). Now more than ever before, it’s you, their LO. We like to refer to the home buying process in the terms “Contract to Close”, however the LO relationship with the client often starts before that. This means they are trusting you to not only assist them in getting their loan, but also guide them through to settlement, and of course manage their loan moving forward.
Getting your client to the settlement table requires a lot of moving parts. The best way to guide your buyer through
these moving parts is through Education. Not only educating your client, but also ensuring that you are continuing to educate yourself on the process and with all parties involved.
Educating the buyers on the big picture of getting approved for the loan is important, but there are a few things that feel small but can hold us up almost every time. Here are four areas I see often come up at the closing table as issues.
PMI
Buyers typically know that it exists and that they have to pay it. They rarely fully understand why. I know the loan process is complicated for most buyers and most LOs probably do try to explain it. However, this is a question that can hold up a closing. Before we get to the settlement table, make sure this is one of the points you review with your client at the end of the process to confirm that they fully understand PMI.
Escrows
When we get about halfway through a closing package, we come to a document that that lays out how funds go into and out of their escrow account over the first year. This is very important information for the buyers to have but they are often confused. Remember, just in the last day or so, they were instructed to wire their closing fund to an escrow account. It’s not often explained to the buyer in advance that we, as in the parties involved in the closing process, will be referring to two different escrow accounts. The title company’s escrow account that their EMD and closing funds will go into temporarily, and the lenders escrow account that is set up for them for as long as they have the loan.
Can a title agent explain this at closing? Of course. However, buyers do not like to admit that they don’t understand something. When a settlement agent asks if they understand “escrow”, buyers usually say “yes” and the documents get briefly explained, signed and on to the next page. I always notice that “yes” comes with a slightly confused look. I now always take the time to briefly explain the difference and 9 times out of 10 the buyer thanks me and says they actually did not understand at all. The lenders escrow account is much more important for them to understand so please ensure that you really answer the clients’ questions to avoid confusion at the settlement table.
Servicing
Many LOs work for a broker or lender that will not necessarily be servicing the loan. When this is brought up at closing, buyers, especially first-time home buyers, are confused and uncomfortable. This can be easily explained by a title agent but would make more sense coming from a representative of the lender.
When it really gets confusing to the buyer is when the closing package has a form to complete asking the buyer how they want to pay their mortgage and to provide bank account information for direct withdrawals. Buyers often do not come to closings prepared with this information. If the closing package is going to request this information, it either needs to be communicated to the client in advance or clearly explained that it’s ok not to fill in this information. We know that usually this can be worked out later, but since these documents often require a signature, it is uncomfortable for the buyer to leave it blank, and it holds up the closing.
General Closing Documents
When was the last time you reviewed a closing package? Questions come up every day at settlement. Most questions the settlement agent can answer, but when we need to reach out to the LO, it’s never comforting for buyer to hear that the LO isn’t sure which document we’re referencing. The automatic payments document is a perfect example of a document that we often have to call to confirm if it needs to be completed and the LO will say they didn’t even know that was in there. Get yourself a copy of a standard closing package and know it.
Your customer’s experience is only as good as your settlement. Curating a smooth settlement will increase your positive customer reviews and repeat business. And the smooth settlement process starts with how you educate yourself and your client.
If we can help you or your clients, please feel free to reach out to us here at Greenspring Title. www.greenspringtitle.com
Michelle Krupka
Greenspring Title Company, Inc
MKrupka@GreenSpringTitle.com
40 York Rd Ste 300
Towson, MD 21204-5266
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