Helping Understand Closing Docs
The closing date — aka “signing date” — can be hectic. That’s because this is the day your client has a lot of forms to read and put their signature on. Many of these documents are wordy and confusing. But it’s important for anyone to understand them before signing.
Guess what? Your client doesn’t have to do this in a rush and under pressure. Instead, they can request a copy of this paperwork earlier. This allows them the chance to review these documents at their own pace. And they can inquire about anything they don’t grasp with an attorney or closing officer.
Everyone should learn about these priority papers well before the closing date, and know what to look for in these documents, including the fine print. This can avoid serious regrets later.
The closing disclosure
Your client is expected to sign several forms, notes and instruments on the closing date. And one of the most important is the closing disclosure (CD). Therefore, the lender must give your client this document three business days before your scheduled closing. The Consumer Financial Protection Bureau recommends checking:
Final loan documents
Other crucial papers clients can also expect at closing include the:
This is the agreement to pay the mortgage. It should indicate the total amount being borrowed; the interest rate; the consequences for late payments; and if there is an adjustable rate, an explanation for how the rate can change.
Deed of trust
Repeating info from the promissory note, this document defines borrower rights. It also gives the lender the right to claim the property via foreclosure if the signer fails to meet mortgage terms. Clients should look closely at the wording within. For example, the “occupancy” section should state that your client will occupy the home as their principal residence.
Also, the “hazardous substances” section states that they’re not permitted to store hazardous materials in the home. And the “acceleration” section declares that their loan can be in default if they fail to make timely mortgage payments or abide by the loan’s conditions. One of those conditions is that if they sell the property, they must repay the loan.
Initial escrow disclosure
This statement shows the exact charges they’ll pay into the escrow (impound) account, if they have one. It should break down the principal and interest payments and indicate impound amounts for insurance and taxes.
The next section reveals how the escrow (impound) funds are spent. Clients should look for lines that show the monthly escrow payment, any withdrawals to cover taxes and insurance, and the account’s running balance.
But wait; there’s more…
The above-listed documents are the most important, but not the only paperwork your client will get.
Other, less-critical items included in the review-and-sign stack can include:
Proactive steps your client can take
To prevent borrower’s remorse, advise clients to try these tips:
Get the closing documents in advance. Ask the closing officer for a complete set of these documents. Do so at the same time you receive your closing disclosure, which is at least three days prior to closing.
Have a lawyer read these documents. This is usually the largest financial commitment most people make in their lives.
Check the numbers carefully. Be sure the amount borrowed is the same amount that was on the loan estimate and closing disclosure forms, and make sure the promissory note is for that amount only.
Check the amount of money you need to bring to closing. This is on page 3 of the closing disclosure in the calculating cash to close tab.
The main takeaway here is to read the important things, preferably before your client’s closing day. They should call the lender if they have any questions about the loan, and they should sign nothing until they’re satisfied with the answers.
This article was provided by one of the Lenders we work with and trust.:
Noble Home Loans
Jack LeVine has been trusted by well over a thousand clients in the last 28 years. He gets the job done – and gets it done right. No other agent in Las Vegas has the depth of knowledge and experience that Jack has of the vintage neighborhoods, the mindset of buyers for 50 or 60-year-old homes, and the special things that dramatically affect the value of a vintage home.
If you want to sell (or buy) a Vintage Las Vegas era home – Call or email Jack LeVine of Very Vintage Vegas Realty – 702-378-7055 firstname.lastname@example.org