Like let’s say you bought a house from someone named James for $200K. Does the mortgage lender you use pay James $200K in full?
Close, but not exactly.
What happens is this: You get a loan for $200,000 to buy James’ home. Let’s say James still owes $125,000 on the property. The $200,000 goes from you to the settlement or title company. The settlement company has gotten the "payoff figure" from James’ mortgage holder. That’s $125,000.
Your $200,000 goes in. The settlement company sends $125,000 off to James’ mortgage company to pay the old mortgage off. And the other $75,000 goes to James.
Of course there are a lot more expenses. If there’s a Realtor (or Realtors) involved, some of that money goes to the Realtors. Usually, you’ll prepay taxes and insurance. And so on. You’ll probably also buy title insurance. Then there are probably points on the mortgage that you’ll pay. On the other hand, you may have asked James for a "seller subsidy" to help with closing costs. So some of the money that would have gone from your lender to James comes back to you.
So, really, you’ll end up paying more than $200,000. And James will receive less than $125,000.
Before closing, James will receive a "net sheet" from his Realtor, giving a pretty close estimate of how much he’ll really receive. And about 48 hours before closing, your Realtor and James’ (and you and James, if you want) should receive a draft copy of the HUD-1.
The HUD-1 is the form that settlement companies use to calculate all that.
Hope that makes some sense.
May 1st, 2010 at 4:59 am
Less what is owned on it and less fees. So if James owed $50,000 that would come out less fees like escrow and agents selling fees and other fees.
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May 1st, 2010 at 5:12 am
To answer your question….It depends. Generally, James wont get full access to the money….he will only receive an amount after all fees and charges are deducted and the sellers remaining mortgage is paid out.
If James still owes $190000 on his home, YOUR lender will pay HIS lender $190000 and James will receive the remaining $10000 (less any fees and charges like Commission or solicitors fees)
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May 1st, 2010 at 5:36 am
Yes and no. If James owes on the home you bought, he would get the amount of 200,000 – what he owes. If the house is paid off and has no leans or mortgages then James gets it all, minus Uncles Sam’s cut.
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May 1st, 2010 at 5:43 am
Yes, indirectly.
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May 1st, 2010 at 6:04 am
the proceeds are divided at closing. Checks for the bank, the real estate agents and the seller are dispersed when the paper work is signed. A settlement statement is given 24 hours before closing to make sure all amounts are accurate.
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May 1st, 2010 at 6:23 am
Close, but not exactly.
What happens is this: You get a loan for $200,000 to buy James’ home. Let’s say James still owes $125,000 on the property. The $200,000 goes from you to the settlement or title company. The settlement company has gotten the "payoff figure" from James’ mortgage holder. That’s $125,000.
Your $200,000 goes in. The settlement company sends $125,000 off to James’ mortgage company to pay the old mortgage off. And the other $75,000 goes to James.
Of course there are a lot more expenses. If there’s a Realtor (or Realtors) involved, some of that money goes to the Realtors. Usually, you’ll prepay taxes and insurance. And so on. You’ll probably also buy title insurance. Then there are probably points on the mortgage that you’ll pay. On the other hand, you may have asked James for a "seller subsidy" to help with closing costs. So some of the money that would have gone from your lender to James comes back to you.
So, really, you’ll end up paying more than $200,000. And James will receive less than $125,000.
Before closing, James will receive a "net sheet" from his Realtor, giving a pretty close estimate of how much he’ll really receive. And about 48 hours before closing, your Realtor and James’ (and you and James, if you want) should receive a draft copy of the HUD-1.
The HUD-1 is the form that settlement companies use to calculate all that.
Hope that makes some sense.
References :
May 1st, 2010 at 6:45 am
When you buy a house for $200,000, you make a down payment and borrow the rest. The bank pays the seller the loaned amount (minus fees) and you pay the difference with your down payment.
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