Closing on a home? Be prepared to review and sign a stack of important legal documents. These closing documents finalize the real estate transaction, and they can be overwhelming, even if you’re a seasoned homebuyer. And if you’ve been renting a house or living in an apartment and now buying a home for the first time, the process might feel completely unfamiliar…
In this Redfin article, we’ll explain each of the key closing documents and their importance to your purchase so you can grab your keys and get home quickly.
In this article:
What are closing documents?
Closing documents are the set of legal forms that you and the seller sign during the closing process. These documents outline final costs for the buyer and verify the sale for the seller.
It might feel like a mountain of paperwork on closing day, but each form plays a key role in confirming your loan terms and what you’ll actually pay at the end. The exact forms you sign may vary depending on your state’s property laws. Your real estate agent or attorney can let you know if your state requires anything additional.
Understanding these documents ahead of time can make closing day feel more manageable and help you confidently finalize your home purchase.
Closing disclosure
A Closing Disclosure shows all the financial details of your mortgage and total closing costs. Your lender must provide this at least three business days before closing so you have time to review it.
A careful review is essential to understanding the loan terms, projected monthly payments, and closing fees. Ask your real estate agent for help with any questions you encounter during your review.
Proof of homeowners insurance
While it’s up to you to decide how much homeowners insurance you need, your lender will require proof on closing day. This protects their investment and your new home from events like fire, vandalism, and natural disasters. Speak to your insurance company as soon as you know the closing date to ensure coverage starts that day.
To prove coverage to your lender, ask your insurer for a declarations page or full policy. If the policy is new, they may provide a temporary insurance binder until the final documents are ready.
Loan application
While this document was likely completed earlier, the loan application is included among your closing documents for a final review and signature. Review it carefully to ensure everything is still accurate. If your financial circumstances have changed in any way, like your job or income, let your lender know right away.
Promissory note
This written agreement between borrower and lender is a legal document stating that you will repay the mortgage. It details the total loan amount, interest rate, payment schedule, and what will happen if you default. By signing it, you are committing to repay the loan according to those terms.
Mortgage or deed of trust
Whether you use a mortgage or a deed of trust in your closing documents depends on which state you live in. Both documents function as security in the case that you default on payment. When you sign the mortgage or deed of trust, it legally secures your home as collateral for the loan. Put simply, it gives the lender the right to foreclose or sell the home if you miss payments.
Affidavit of title
This sworn statement from the seller confirms that they own the property, have the right to sell it, and that there are no legal claims like property liens against it. It helps protect you and your lender from any future title issues.
Title insurance
Title insurance protects you and your lender from title-related problems, such as liens, unpaid taxes, or ownership disputes. All of these issues can result in financial loss, so reviewing these closing documents carefully is essential. Your real estate attorney or title company can help you ensure that everything is accurate.
Initial escrow statement
Some costs, like property taxes, homeowners insurance, and tax prepayments, are paid from your escrow account. The initial escrow statement details what your lender expects to pay from it and how much you’ll contribute each month to cover these costs in your first year.
Transfer tax declaration
In some states, you must sign a transfer tax declaration to document taxes owed from a home sale. Each state has its own rules, so it’s important to understand your local laws and how they affect your closing costs.
Certificate of occupancy
If you’re buying a brand new home, the certificate of occupancy states that the property is safe and up to local building codes. It typically comes from the builder, but can also be obtained from your local zoning authority. While not usually required for preowned homes, you can still request it to verify any renovations were properly permitted.
Deed
The deed is the legal signed document that transfers ownership from the seller to you. Unlike the title, which shows who owns the property, the deed formally records the transfer and is filed with your local government.
Closing documents FAQs
How do I get copies of my closing documents?
You should receive copies of all the documents you signed at closing, but you can always reach out to your real estate agent, title company, or county recorder’s office to get more.
Are closing documents the same for both buyers and sellers?
No, there are different closing documents for buyers than there are for sellers. Sellers mostly sign and receive documents transferring property rights and ownership whereas buyers sign and receive most of the financial documents like mortgage and insurance. Some documents, like the deed, overlap and are signed by both parties.
Do I need a real estate agent or attorney to review the closing documents?
While it is not always required, it is recommended to have a professional look over your closing documents to ensure accuracy and understanding. State requirements or complex transactions are especially good reasons to have a professional third party assist you.
How long does it take to sign the closing documents and close on the house?
The closing process can take between 30 and 60 days after the offer is accepted, but signing the documents takes less than a full day. Just be sure to review everything carefully in the days leading up to closing day so you can avoid any errors or roadblocks.
Can I sign closing documents remotely?
Yes, you can sign your closing documents online. Some states have specific requirements for remote closing, so make sure to check with your real estate agent or attorney for details on how to navigate the process online.
Wrapping up on closing documents
Understanding these key closing documents will help you feel prepared to summit the mountain of paperwork on closing day. Take your time to review everything carefully before you sign. Once you’ve reached the top, grab your keys and celebrate closing on your new home.
Source link
