Buying a house is an exciting time filled with new opportunities, not a time to stress over the fees and paperwork. As a potential buyer it is helpful to understand what types of documents you should expect during the closing process.
1. Closing Disclosure: This document is a general breakdown of all of the fees involved in the sale of the house. Both parties, the buyer and the seller, get separate disclosures highlighting fees and all closing costs. It is a good idea to compare this document with the most recent loan estimate. If there are any discrepancies it is important for the buyer to contact their lender immediately. This document is to be signed before the mortgage documents, which allows for the buyer to look it over thoroughly. They should make sure even minor details such as spelling, and the address is correct to make the closing day go smoothly and efficiently.
2. Promissory Note: This states that the buyer must repay the lender, including the interest rate agreed upon. This document includes the terms of agreement and highlight details such as the amount being borrowed, the interest rate, and the frequency and number of payments.
3. Mortgage: This document allows the buyer to obtain the loan to purchase the desired property. It also states that the lender can repossess the home if the buyer defaults. It is important that the buyer records this with the county clerk. This allows them to publish that there is a lien on the property being purchased.
4. First Payment Letter: The borrower often signs this document on closing day. It is an acknowledgment of when the first mortgage payment is due. This letter also includes a breakdown of what is included in each mortgage payment. The breakdown may also include property tax and homeowner’s insurance if the buyer decides to include it in their monthly mortgage rate.
5. Initial Escrow Account Disclosure Statement: This document states how much money will be taken out of the mortgage each month and put into an escrow account. Escrow refers to a third-party service which is responsible for holding particular payments, such as property taxes and homeowner’s insurance, until the funds need to be transferred. For example, though the property taxes are paid once or twice a year, a buyer each month will pay into their escrow account as part of their mortgage. This money will be set aside by the third-party until it is time to be paid, and they will disburse the payment.
6. Deed: This document is proof of ownership of the property. Both the homeowner and buyer sign this document in order to transfer ownership of the house. If the buyer has any questions regarding their deed, they should confront their real estate attorney. Remember that property deeds need to be filed and notarized.
7. Title Insurance: This is a type of insurance that protects the buyer and lender from financial loss and claims against the legal ownership of the home. If there are any disputes after the purchase of the home, this type of insurance will pay for any legal fees. This is different than homeowner’s insurance because it protects the homeowner from any past title discrepancies.
8. Homeowner’s Insurance Policy: It is very important that homeowner’s insurance is purchased before moving to the new home. This will make sure that the buyer's home is protected before they move in. Buyers should be aware of what their insurance policy includes and covers before signing. If they are not sure what they are signing, it is imperative to ask questions about their future coverage.
At Rally Point we understand that buying a home can be stressful, especially if you are a new homeowner. Having to read and sign stacks and stacks of documents can be frightening and frustrating, so we are here to answer any questions you may have! Give us a call 732-359-2009.