Answers and Explanations

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1. Which one of the following is not a closing cost?

A. Inspection fees
B. Title insurance
C. Down payment
D. Recording fees

The answer is C. The down payment on your house is not a closing cost. It is usually paid ahead of time.

2. Is the "good faith estimate" provided by the mortgage company binding?

A. Yes
B. No

The answer is B. The lender is required by federal law to provide you with a good faith estimate (or GFE) of your closing costs within three days of your loan application. However, lenders are not legally bound to these figures and there is no penalty for inaccuracy, though most will try to stay close to the initial estimate.

3. Who will conduct my closing?

A. A title company
B. A settlement company
C. An escrow company
D. A real estate attorney
E. Any of the above

The answer is E. Who conducts your closing varies based on where you live. Ask your Realtor or lender who will conduct the closing where you live.

4. When will I find out how much money I need to bring to closing?

A. One week before closing.
B. Three days before closing
C. 24-hours before closing

The answer is C. Under the federal law called The Real Estate Settlement Procedures Act or RESPA, consumers who ask are entitled to see the information available on the HUD-1 settlement statement 24-hours in advance of closing. However, the lender must approve the information on the settlement statement and may not give that approval until right before the closing. Therefore, the information is not always available 24-hours in advance. As soon as the title company receives the approved HUD-1 form from the lender, they will share it with you.

5. Will I be able to pay for my closing with a personal check?

A. Yes
B. No

The answer is B. Unfortunately, no. The title company or settlement agent has to make sure that there are enough funds to pay off old mortgages and other fees. For this reason, the title company will require a certified check be brought to closing to assure that the funds are good. You can obtain a certified check from your bank.

6. If I'm refinancing my home, do I need title insurance?

A. Yes
B. No

The answer is A. Yes, when you refinance the lender considers it a new loan, even if you are using the same lender. They will require a new title search to look for any problems with the title, and will usually require you to purchase a Lender's Policy to protect their investment. You will not need to purchase an additional Owner's Policy. If you purchased an Owner's Policy at the time of the original closing, it is in effect for as long as you or your heirs have an interest in the property. Ask your title professional if you qualify for a refinance rate.

7. Which government form includes a list of my closing costs?

A. 1040
B. HUD-1
C. I-9
D. 401K

The answer is B. The HUD-1 settlement form is the government form that lists all of your closing costs.

8. Is there a difference between closing, settlement, and closing escrow?

A. Yes
B. No

The answer is B. Closing, settlement, and closing escrow can be used interchangeably and all mean finalizing all legal matters associated with buying your house and making your home officially yours.

9. Who should I consult to learn more about title insurance?

A. The ALTA Web site
B. A local title company
C. Your real estate attorney
D. Your real estate agent
E. All of the above

The answer is E. While real estate agents and lenders have some knowledge about title insurance, it is best to talk to a local title agent, settlement agent, or closing attorney for the most accurate information. Find a list of ALTA member companies who can conduct your closing and issue you an Owner's Policy..

10. I will automatically be issued an Owner's Policy of Title Insurance at closing.

A. True
B. False

The answer is "not necessarily." In some parts of the country the answer to this question is yes, in some parts the answer is no. Talk to your lender and title company to find out how it is done in your area, and insist on receiving an Owner's Policy of Title Insurance for a one-time fee paid at closing. Who pays for the Owner's Policy varies from state to state and sometimes by county. Ask your title company or Realtor how it is handled where you live.

11. How long will my Owner's Title Policy protect me?

A. 1 year
B. 5 years
C. 99 years
D. As long as I or my heirs have an interest in the property

The answer is D. Your Owner's Policy paid for as a one-time fee at closing covers you for as long as you or your heirs have an interest in the property. Insist on an Owner's Policy when buying your home.

12. How can I find the best price for title insurance?

A. Visit the ALTA Web site for a list of reputable title insurance companies and ask the companies for quotes
B. Ask your title company if you are eligible for any discount, such as a reissue discount.
C. Consult with your Realtor, Broker, or Lender for information and advice.
D. All of the above

The answer is D. Title insurance is important and there are many ways to make sure you are getting the best price, including shopping around to reputable title insurance companies and checking with companies your real estate agent or lender are already working with for the best rate. Be sure to visit the Shopping For Title Insurance section of this site.