Step 1: Understanding Your Documents
Taking inventory of your closing documents will ensure you and your lender have everything that’s required for closing. It also makes it easier to locate and send any forms requested at the last minute, which can help you avoid holding up the process.
You can even create a list of all the documents you need and the deadlines for turning them in. Check them off as you send them to your lender and mark the date they were sent. You’ll also want to get verification to confirm that they were received. Use this list of common closing documents to start.
Closing Disclosure
As required by law, your lender will send the Closing Disclosure at least 3 business days before closing day. This document lays out, in detail, all of the important information of your loan. That includes:
- Loan term, loan amount and interest rate
- Estimated monthly mortgage payment
- Closing costs, which include origination, underwriting and government fees
- Amount of money you’ll need to bring to closing, also known as cash to close
- Loan disclosures
Thoroughly reviewing this document is one of the most important steps you’ll take when closing on a house. You’ll want to compare the Closing Disclosure to the loan estimate to make sure there aren’t any discrepancies. If you find an error, contact your lender to correct it. It may delay your closing, but the mistakes must be fixed before you sign the document.
Seller’s Disclosure
A Seller’s Disclosure is a document that the seller is legally required to fill out to list all of the known defects of the property, which could influence your decision to purchase the home. Depending on the disclosures your state requires, these defects may include repair history, water damage, foundation issues, infestations, lead paint or malfunctioning systems.
Read the disclosures carefully, as there could be major issues you may not have noticed on your final walk-through of the home. This is one of the last chances you have to learn more about the home before making that big purchase – there’s usually a “no-return policy” on houses. Seller’s disclosures can help you save thousands of dollars or even help prevent buyer’s remorse.
If there are any red flags on the disclosures, request more information from the seller or have a home inspector look more closely at the specific issues. You’ll want to get as much information as you can to determine whether the home is worth the time, money and stress involved in fixing or living with the particular issue. If you still wish to proceed with the purchase of the home, you could consider negotiating with the seller to have them pay for the repair or take the cost to fix it yourself off the purchase price.
It’s important to note that not all states have legally mandated seller disclosures, so be sure to speak with a real estate agent about what’s required in your area.
Title Documents
During the closing process, a title company, working in the interest of you and your lender, will perform a title search to ensure the seller owns the right to the property and can legally sell you the home. The company also looks for existing liens on the house to prevent new homeowners from getting hounded by the previous owner’s lenders for unpaid debts.
A real estate attorney or escrow company will review the title documents to ensure the title is as expected. Typically, the seller owns the rights to the home, and there will be no existing liens or other concerns on the title.
Loan Application
When you apply for your home loan, your lender creates a copy of your original application for closing. You’ll need to review it for accuracy and let your lender know if there have been any changes since first applying. For example, any job changes or new debts must be disclosed to your lender as it can affect the terms of your loan.
