The Closing Documents on your home mortgage have a bad reputation. Most people believe there are far too many of them and they are far too complex. With this blog, we hope to avert your feelings of resentment toward that large stack of documents you will be required to sign for closing your home mortgage.
This blog spotlights the purposes and powers of the major Closing Documents. We ask you to realize that this paperwork will probably represent the largest purchase of your life. Therefore, the documents protect you as well as the lender. Although these papers have been the topics of previous Palm State blogs, we feel we should occasionally review them for new home-buyers.
Palm State Mortgage Presents–The Home Closing Documents: Papers, Power and Protection
Palm State Mortgage reminds you that 2015 brought us the important Know Before You Owe mortgage rule. Thus if you are buying another home in 2019, you’re going to see some new forms at closing.
Before you complain about today’s tall stack of paperwork, we want you to know that 2015 law actually replaced four old disclosure forms with two new ones. Plus, the new forms actually reveal more transparency and clarity concerning the process.
A Guided Tour of your Closing Documents
As you read this, you are beginning a journey. The land of Closing Documents might not be the most exciting or adventuresome of destinations. However, you will respect- if not enjoy – these papers for the opportunity of home ownership they symbolize.
Now, let’s look at several the closing documents as if they were stops you would make as you journey from home-buyer to home-owner, one document at a time.
The Closing Forms: Documents You Will Sign at Closing
Number One of the Closing Documents: The Disclosure
The story of this document begins 3 days before your actual Closing Day. This form lists:
- all of the actual fees,
- Plus all of the costs
- and the credits associated with completing your loan.
You will get this document 3 days before your scheduled closing. That way everyone concerned with your home purchase has time to look over the deal.
Play the match game: With this paper in hand, compare and make certain that the loan terms and costs compare significantly with those provided in your Loan Estimate.
(Remember, by law your lender must provide you with it at least three business days before your scheduled closing.)
Number 2 of the Closing Documents–The Promissory Note:
In this Closing Document, you will see the details of the loan.
- You will officially learn the due dates for payments and where to send them.
- You will also see an explanation of what happens if you fail to make your payments on time.
This is a serious piece of paper. When you sign this document, you are agreeing to repay the loan by the terms specified.
Number 3 of the Closing Documents–Deed of Trust:
This form details your rights and responsibilities as a borrower. As you lift your pen to sign, you must understand you are giving the lender the right to take back the property through foreclosure if you cannot pay as agreed. Sometimes papers or documents are legally referred to as “instruments,” perhaps because they “do” so much. Thus we have, “the Deed of Trust.” This is a security instrument. It could actually be called the “Mortgage,” depending on your state. Signing the Deed of Trust indicates your pledge to use your home as security for a loan.”
To put it bluntly, this Closing Documents says that if you fail to make your mortgage payments, the lender can foreclose on your property. Some Western states, such as California, use a deed of trust in lieu of a mortgage.
Number 4 of the Closing Documents–The Deed:
This paper makes you smile because, with it, the seller signs the deed to transfer ownership over to you. You will notice it contains all the names of all the buyers on it. And yet, you do not get to take this piece of paper home with you.
You should understand that your title will be held by a third-party trustee. It is not really yours until you have completely paid for the house. You will, however, get to take home a copy of the deed at closing.
Number 5 of the Closing Documents: Affidavits and Declarations:
Taken as a set, these papers declare that the information you provide is true. For example, you will sign one that states the property will be your primary residence. Likewise, you will sign one in which you will verify that proper repairs to the property were made prior to closing.
Number 6 of the Closing Documents: The Certificate of Occupancy
This document declares that a newly-constructed home is in compliance with all of the local building codes and laws.
” If you built or purchased a brand new home, you may need this document in order to legally move into your new residence.” You’ll recognize this as a document that is issued by your local government, such as your city’s building department.
Number 7 of the Closing Documents: Notice of Right to Cancel
Your lender must supply this paper under federal law. The Notice of Right to Cancel. It provides each borrower under the transaction with a three business day grace period to call off the deal.
The experts put it this way, “The right of rescission is a right, set forth by the Truth in Lending Act (TILA) under U.S. federal law, of a borrower to cancel a home equity loan or line of credit with a new lender, or to cancel a refinance transaction done with another lender other than the current mortgagee, within three days of closing.”
Checking Up on the Law
The law adds, “The right is provided on a no-questions-asked basis, and the lender must give up its claim to the property and refund all fees within 20 days of exercising the right of rescission.”
Closing Documents: Terrific Take-Aways
This week’s blog is a checklist of powerful papers. As you read and sign each closing document at your mortgage closing, think of each as a stop on a special kind of tour. Each signature brings you one step closer to the destination of owning your home.
Palm State Mortgage wants to make you comfortable with every page, every step on this journey.
As we have said previously, we want our clients to recognize and understand all their paperwork, and especially their Closing Documents.
So, we ask that you do not hesitate to ask questions. Palm State Mortgage will guide you through the home mortgage process, step by step.
Recognizing What the Milestone Closing Documents Represent
Closing and the Closing Documents mean a new style of independence for you and your family as you take ownership of a long-held American dream. There is a special look on the faces of new homeowners, a look of pride. As we have noted before, Palm State Mortgage Company believes that a buyer’s triumphant expression at closing is full of the hope, heart and the core values that make this a great country.
That expression is part of the reason Palm State Mortgage is in the mortgage broker business.
Every home buyer has a story and we are proud and grateful to be a part of that story as we shake your hand at closing and hand you a large folder of your papers of power, your Closing Documents.