Closing documents: A guide for homebuyers

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From start to finish, the homebuying process involves complex paperwork. The closing is no exception: As you near closing day, be prepared for the different types of documentation you’ll encounter with this convenient closing-documents checklist.

Closing documents checklist

List of closing documents

Closing disclosure

The closing disclosure contains all of the details of your mortgage, including an itemized list of closing costs. It’s similar to the loan estimate — which you might also receive a copy of — that outlined the interest rate, monthly payment and other information about the loan. You’ll receive the disclosure at least three days before the closing, so you’ll have time to carefully review it and ask your lender or attorney any clarifying questions.

Proof of homeowners insurance

At closing, you’ll need to provide your mortgage lender with proof of homeowners insurance for the property. So get your insurance policy set up as soon as the closing date is set — it should go into effect on the day you close. When setting up your insurance policy, you’ll need to provide a mortgagee clause, indicating that the lender is an interested party in the property. Your loan officer can provide this information to you — you should also ask them how to pay for your first year’s worth of homeowners insurance. Your lender may want you to prepay it out of pocket when setting the policy up, but some lenders will add the premium cost to your closing costs.

Loan application

As a buyer, you’ll also receive a copy of your initial mortgage application. Although nothing should have materially changed from when the application was first submitted, both you and the seller (more specifically, either the seller’s attorney or real estate agent) should review it.

“We want to prove to the seller that the lender can righteously award a loan on the basis of the borrower’s income, credit and savings,” says Jeff Lazerson, president of Mortgage Grader, a mortgage broker based in Laguna Niguel, California. “It serves no good purpose for anyone if the property is off the market and buyers can’t close.”

Mortgage or deed of trust

The mortgage or deed of trust is the agreement between you and your mortgage lender to put the home up as collateral for the loan. “In layman’s terms, it gives the lender the right to foreclose on the property if the borrower defaults,” says Debra Johnson King, director of diversity and inclusion for the Mortgage Firm in Miami Gardens, Florida.

Many states allow or use a deed of trust, which differs from a mortgage in that a trustee — usually a title company or attorney — is authorized to take action if the borrower stops paying. This arrangement differs from a mortgage agreement, which only involves the borrower and the lender, not a third-party trustee.

Note

The note documents the promise you made to your mortgage lender to pay back the loan. It includes details about the home as well as the terms of the loan, including repayment.

Deed

The deed conveys ownership rights from the seller to the buyer. Only the seller (or sellers) sign the deed. The transfer is then recorded with the county.

The deed is not to be confused with the title, which is essentially the legal document that signifies property ownership. When you purchase a home, you acquire not only the title, representing your ownership rights, but also the deed, serving as the concrete proof of this rights’ transfer.

Affidavit of title

The seller also provides an affidavit of title, a legal document that establishes they hold title to the property and includes information about any liens or other title issues.

There might be other affidavits for the buyer or seller to sign, as well. Essentially, these are sworn statements regarding various facts of the transaction.

Title insurance policy

The title insurance documents pertain to the lender’s policy, which you’ll pay for with your closing costs but only protects the lender, not you. If you chose to purchase a separate owner’s policy, you’d also see documents about it, and be protected in case of any claims against ownership of the property. If you get an owner’s policy, be sure you understand any exceptions to the coverage, or circumstances or items the policy won’t cover.

“I always recommend title insurance to my clients — just get it,” says Johnson King. “You can never have too much insurance. If you have a good real estate agent, they can negotiate for it to be paid by the seller at the time of closing.

Initial escrow statement

Your escrow account already contains the earnest money or initial deposit you made on the home, and you’ll continue to fund it for other escrow items, like homeowners insurance and property tax prepayments. For the closing, you’ll receive an initial escrow statement describing how much your lender or servicer will pay out of this account when these items come due during the first year of your mortgage.

Transfer tax declaration

If you live in one of the many states with a real estate transfer tax, you and the seller will also receive documentation detailing the taxes owed.

Certificate of occupancy

Finally, if you’re buying a newly built home, you’ll need to have a certificate of occupancy that proves the property is fit to live in and fit for the purpose that it was built. The certificate includes the address and description of the property and verifies that it’s up to code. You should’ve received a certificate from the builder or developer, but if not, you can obtain it from your local building or zoning authority.

If you’re buying a preowned home, you can still ask the seller for a certificate (and if the home pre-dates certificates of occupancy, your local authority might have an equivalent document). This can help confirm whether the seller made improvements with proper permits — if not, it’ll be your responsibility to legalize the home for occupancy.

How to get copies of your closing documents

You should receive a packet containing copies of all your home-closing documents at the closing itself. If you don’t, or if you simply want extra copies, just ask your real estate agent. Agents and brokers are obliged to maintain a record of every transaction and should be able to give you copies of the related documents. In addition, the closing documents are usually held by the closing agent or escrow officer. Papers that are public records, like the deed, can be accessed either from the county recorder’s office or a title company. Nowadays, these documents are usually digitized, and you could be provided with a secure method to download and save them.

Bottom line

Purchasing a home involves a lot of paperwork. As the buyer, you’ll need to obtain and document homeowners and title insurance, and you’ll receive many documents before and at the closing, like the note and mortgage or deed of trust. Pay close attention to all of these to ensure the information is accurate before signing.