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You've got two main responsibilities at the closing: to hand over money and to sign papers. You might feel a bit intimidated when you see the stack of papers. Don't worry, you'll get through them all. As the attorney or escrow agent passes each document to you, she'll explain what it means. If you have any questions, ask; the only question you're likely to regret is the one you don't ask.
If you got your HUD-1 and other draft documents a day in advance, you've had time to look them over and note any questions you have. But don't feel rushed. You have the right to read each document before you sign it. Don't sign anything you don't understand. Insist on a clear explanation, and make sure you're comfortable with what you sign.
The documents you sign depend on your state, your purchase agreement, and the terms of your transaction. But here's a description of some:
- Final truth-in-lending disclosure statement. When you applied for a mortgage, you received an initial version of this statement. Now that the bank has approved your loan, you get the final version, called the Regulation Z form. It details your payments, the loan's interest rate, and how much you'll pay over the lifetime of the loan. It also shows any modifications made to your rate for points you bought when you took out your mortgage. Take the time to read this form and confirm that everything is correct.
- HUD-1 settlement statement. This federal form, which you and the seller both sign, details the costs related to the sale. It spells out who pays how much to whom. The expenses listed include not only the cost of the property, but other costs as well, like property taxes and personal property included with the sale.
- Mortgage note. This document, also called a promissory note because it records your promise to repay your mortgage, states the amount you borrowed and the terms of the loan. It also spells out the lender's options if you fail to make payments.
- Mortgage (called a deed of trust or trust deed in some areas). This document secures your mortgage note - it gives your lender a claim against your house if you don't live up to the terms of the mortgage note.
- Monthly payment letter. This letter breaks down your monthly payments for the first year of your loan, explaining how much money you'll pay each in principal and interest. It also may say how much of your payment goes into escrow for taxes and insurance (including PMI if you have mortgage insurance).
- Initial escrow statement. This document (which may supplement the monthly payment letter) itemizes the part of your monthly PITI (principal, interest, taxes, and insurance) payments that go into an escrow account, breaking down how much goes toward taxes, how much toward homeowner's insurance, how much toward PMI, and so on. If you have to pay a lump sum in the first year to "cushion" your escrow account, it states that amount, too.
- Mortgage servicing disclosure statement. This document simply tells you whether your lender intends to service your loan itself or sell it to another lender on the secondary market. If your original lender transfers your loan to someone else, the second lender has to honor the terms of your loan.
- Title insurance commitment. This is a promise that the insurance company will issue you a homeowner's policy. You get the actual policy in the mail a few weeks after the closing.
- Deed. This document transfers the home's title from the seller to you. The deed should contain an accurate description of the property and must be signed according to your local state laws. Check to make sure that your name is spelled right and that it describes the kind of title you've chosen. After the closing agent records the deed with your local government's property recording office, she'll send it to you. Keep it somewhere secure, like a bank safe deposit box.
- Bill of sale. Just as a deed transfers ownership of the house and grounds to you, the bill of sale gives you ownership of any personal property that conveys with the home, such as appliances, drapes, fireplace accessories, and so on.
- Affidavit of title. By signing this document, the seller swears under oath that he knows of no title defects or liens against the property. The specific wording of the affidavit varies by state, but it typically includes:
- The seller's name and address
- A statement that the seller actually owns the property
- A statement that the seller hasn't sold (or agreed to sell) the property to another buyer
- A statement that no liens exist against the property
- A statement that no assessments exist against the property
- A statement that the seller hasn't declared bankruptcy
A signed affidavit of title offers you some protection and legal recourse if a title defect or lien turns up later. - American Land Title Association (ALTA) statement. Like the affidavit of title, the ALTA statement ensures that the property's title is clear and that the property is free of easements, encumbrances, and liens. Both you and the seller sign the ALTA statement. You need this document to buy title insurance.
- Home warranty. If the home comes with a warranty - whether from the builder or a home-warranty company - you get the warranty at the closing.
- Homeowners' or condominium association documents. If the home you're buying is part of a homeowners' or condominium association, you have additional documents to sign, including covenants, conditions, restrictions, and the association's by-laws.
- Certificate of occupancy. If the house you're buying is new construction, this document certifies that the building meets building codes and is safe to occupy. Your local government issues the certificate of occupancy.
At the end of the closing, you get a complete set of documents for your records (except for the deed; you get that after the closing agent records it with your local government). Hang on to the paperwork, and store it in a safe place, such as a safe deposit box at the bank.
Save back-up copies of your documents by running them through a scanner and emailing the files to yourself. Keeping copies in your webmail account or your Internet service provider's email server gives you a secure backup and easy access to your paperwork if you need to review anything.
