The paperwork that comes with closing on a house can be so much that it makes your head spin. You should know exactly what you’re signing at closing, whether you’re buying or selling, so you don’t get any nasty surprises that cost a lot of money. In this guide, you’ll learn about the important closing papers you need to look over before you sign.
An Overview of Closing Documents
Closing documents are the stack of paperwork required to finalize the sale of a home They spell out the terms of the mortgage, loan amount, interest rate, fees, and other crucial details. Both buyers and sellers must sign closing docs for the sale to become official
These documents provide legal protection for all parties involved. For buyers, they ensure you understand the mortgage terms and fees. For sellers, they guarantee payment and transfer ownership. And for lenders, they reduce financial risk.
Even though there are a lot of documents, each one is important. It will be easier on closing day if you know what they are and why you need to sign them.
Top Closing Documents for Home Buyers
As a buyer, expect to sign around 10 documents at closing. Here are some of the most common and what they mean:
Closing Disclosure
This form from the lender goes into great detail about the mortgage terms, monthly payments, interest rate, and final closing costs. The buyer gets it at least three business days before the closing to look over the fees and loan terms.
Mortgage Note
Also called a promissory note, this contract states you agree to repay the loan amount borrowed from the lender. It specifies payment amount, due dates, interest rate, and penalties for late payment.
Deed
This document officially changes your name from the seller to the new owner of the home. It contains property details and identifies the buyer and seller. After a title search shows there are no liens, you’ll get the deed.
Proof of Home Insurance
Lenders require proof you purchased a home insurance policy meeting their coverage requirements. Provide your declarations page or insurance binder.
Loan Estimate
Your lender sends this shortly after you apply, estimating monthly payments, closing costs, interest rate impact, and other mortgage details.
Loan Application
Review your application for accuracy one last time at closing. Confirm all personal and financial details are correct before signing.
Title
Separate from the deed, your property’s title designates legal ownership. The deed transfers title from seller to buyer. Holding title gives you full rights.
Escrow Account Statements
These show how much of your payment goes to property taxes and insurance. Review the initial statement to understand escrow allocations.
Top Documents for Home Sellers
Sellers generally sign fewer documents, about 5. Here are some of the key forms you’ll encounter:
Deed
Transfers legal ownership of the home to the buyer. Seller must sign the same deed document that the buyer signs.
Bill of Sale
Indicates seller has sold the property to the buyer. Proves transfer of ownership along with the deed.
Mortgage Payoff Agreement
Guarantees seller will pay any outstanding mortgage balance. Ensures existing liens don’t affect sale.
Certificate of Title
Comes from the local government, this certifies the seller legally owns the home and has the right to sell it.
Bill of Sale for Personal Property
If any furniture, appliances, or decor items convey in the sale, document transfers ownership through this form.
How to Get Copies of Your Signed Documents
Don’t leave closing empty-handed! Ask for copies of everything you sign. Later on, you can also request copies from your real estate agent or closing officer. These provide crucial records of the sale terms and mortgage details. Keep them in a safe place for future reference.
Why Reviewing Closing Docs Matters
With this overview, you can tackle closing paperwork with confidence! Although the stack seems long, each document has a purpose in finalizing your home sale.
Carefully reading before signing reduces surprises and ensures you understand what you’re agreeing to. Don’t hesitate to ask questions or clarify any confusing items.
A smooth closing gets you one step closer to the keys to your new home. Knowing your documents makes the process less stressful so you can focus on the excitement of move-in day!
Closing Protection Insurance
A closing protection letter or insured closing letter is a contract between a title insurance underwriter and a lender. The underwriter agrees to indemnify the lender for actual losses caused by certain kinds of misconduct by the closing agent.
Title underwriters often authorize closing agents to issue these letters to lenders when the closing agent anticipates issuing the underwriter’s title insurance policies in the transaction. Most letters explicitly make a third-party beneficiary out of the borrower in a purchase transaction.
Typical closing protection letter provisions cover failure to follow written closing instructions, to the extent that the instructions affect the validity, priority, or enforceability of the mortgage lien, require the closing agent to obtain, but not to vouch for the validity or effectiveness, of a specific document, or relate to the collection of funds due to the lender. The letter also covers fraud or dishonesty in handling the lender’s funds or documents.
How Closing Works
Closing is the final step in the homebuying process in which the mortgage becomes official and the title is transferred to new owners. A closing agent, usually an attorney or official from a title or mortgage company, oversees the closing process, which takes place at a title company or escrow office.
The mortgage closing process varies from state to state. This process is called a closing because the escrow account used to complete the property purchase process gets closed. During closing, also called settlement or account settlement, the participants review, authorize, and date numerous legal documents.
What are usual Closing Documents? What are usual House Closing Documents? House closing documents…
FAQ
What is the meaning of closing documents?
Documents used to exchange money and rights to real estate are called closing documents. At the closing, also called a settlement, closing documents are signed. The closing is the last step in a transaction.
What documents are needed at closing?
Closing Documents You Should KeepHUD-1 settlement statement. Itemizes all the costs — commissions, loan fees, points, and hazard insurance —associated with the closing. Truth in Lending statement. Mortgage and note. Deed. Affidavits. Riders. Insurance policies.
Which document is most important at closing?
Here are the five most important documents you’ll most likely see at closing:Closing Disclosure. The Closing Disclosure may not be the most riveting read, but it’s essential to making sure that you’re not getting ripped off. Deed. PLAT Map: . Promissory Note. Deed of Trust.
What happens after closing documents are signed?
After closing documents are signed, several key events occur, including the transfer of funds, recording of the deed, and issuing of a title insurance policy.