What are common closing documents?

Closing documents for buyers

There are many closing documents for buyers. They will need to sign these documents before they can get the keys to their new home. Closing day will likely be blurry and it may not be easy to tell one item from another. Here is a list of the forms you will sign.

Closing Disclosure

A Closing Disclosure is a document that defines the parameters and costs of the mortgage, including the loan amount, interest rate, monthly mortgage estimate and closing costs.

Real estate law dictates that lenders give homebuyers the closing disclosure at least 3 business days before the closing day. This period gives buyers the opportunity to review and understand the cost of the mortgage.

While the loan estimate approximates costs to homebuyers, the closing disclosure provides hard numbers. Plus, closing disclosure allows buyers to check for errors, from the spelling of their name to the term of the loan. Once the buyer has notified the lender of the necessary changes, the lender will send updated closing information and reset the 3 business day window.

Loan estimate

Like the closing statement, a Loan estimate comes from your lender. It outlines your monthly mortgage payment, closing cost details, how your interest rate affects your expenses, property valuation, and homeowner’s insurance.

Your lender will send you a loan estimate 3 days after receiving your mortgage application. If there are significant changes to your loan estimate in the weeks or months before closing, such as an increase in interest rates, your lender will send you an updated loan estimate.

Proof of home insurance

No law requires buyers to buy Home Insurance, but lenders usually require it to reduce their financial risk. Home insurance policies vary depending on the needs of the owner and the insurance company. However, the policy must meet the lender’s minimum requirements for the closing to occur.

To provide proof of insurance to your lender, ask your home insurance company for a declarations page or the full policy document. If you purchased your policy a short time ago, the insurance company may send you a home insurance binder as proof of fortune until they finalize your claims page.

Loan request

Your lender should give you a copy of your loan application to review at closing. Homebuyers should go through the app one last time to make sure everything is correct. Your lender can correct any errors you find and ensure that all loan documents are consistent.

mortgage note

A mortgage note, also known as a promissory note, is a contract that the home buyer will repay the lender the amount borrowed to purchase the home. The mortgage note specifies the monthly payment and the duration of the payments.

At closing, the mortgage note will show the amount you are borrowing, the interest rate, prepayment penalties, and consequences for late payment or default. This is a legally binding contract that you should review carefully.

Only sign a mortgage note (and your other documents at closing) when the information in it is completely correct and your lender satisfactorily answers your questions.

Blocked account statements and documentation

Buyers must review and sign the initial escrow statement as part of the fence. The escrow statement outlines the portion of your monthly payment that will cover your property taxes and home and mortgage insurance premiums.

Because property taxes can change from year to year, your escrow account statement may not reflect what you owe. If you overpay, additional money in the account will be sent to you at the end of the year if the excess is $50 or more.

If your taxes or the value of your property increase significantly, you could find yourself owing at the end of the year because the amount stipulated by the escrow account statement did not pay your taxes in full.

Deed

A deed transfers ownership of the home from the seller to the home buyer. The seller, or grantor, must obtain the deed for it to be valid for closing.

Before a homebuyer receives the deed, their attorney or title company will perform a title search to confirm that the property has no liens against them. The county where the property resides will receive a record of the deed transfer.

The deed and the title deed are closely related but distinct. The title designates who owns the property, while the deed is a brief document that transfers title from one party to another.

Title

The title defines the ownership rights to a house. Unlike the deed, it is not a set of documents but a concept that gives the owner the right to do with the property as they wish.

As a homebuyer, having title to your new home is essential. Thus, the deed of ownership is an essential document granting you ownership rights to the accommodation.

James V. Hayes