| Sorting Through the Mortgage Paperwork |
If you've ever closed on a home before, you've probably thought that the packet of documents you're required to sign looks intimidating. First-time homebuyers may especially wonder, "What exactly am I agreeing to by signing these documents? What do they all mean?" To make you more comfortable at your next closing, each of the following links provides you with a brief explanation of each document you will be asked to sign or that will be included in your closing package.
Note
A document requiring a signature that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
The document that pledges a property to the lender as security for payment of a debt.
A document fully disclosing the terms and conditions of a mortgage including the annual percentage rate (APR) and other charges. Lenders are required by federal law to provide this disclosure to borrowers and does require a signature by the borrower.
A document originally generated and signed by the borrower at the time of pre-approval that details the costs charged by lender for the borrower to obtain a mortgage.
A document outlining the amounts that will be held for property taxes, homeowners insurance, private mortgage insurance (PMI) and/or flood insurance from a borrower's total monthly mortgage payment.
Mortgage insurance provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require mortgage insurance for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
Insures property ownership.
Insures against damage or liability to property.
A document confirming an applicant's creditworthiness after verifying employment and assets. It gives a borrower the ability to show an approval, subject to an acceptable offer to purchase and an appraisal.
A document outlining the borrower's right to cancel the mortgage agreement. The borrower has three business days after signing the closing documents to cancel the transaction. This document is only included in cases of mortgage refinancing.
A document disclosing the sale of the borrower's mortgage to a third party investor.
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing.