The closing is an important day for the buyer as well as the seller. The seller will transfer the property to the buyer, fully pay off any mortgages and receive proceeds of the sale. The buyer will become the new owner of the home and will either secure a mortgage or pay cash

And do not forget the paperwork! The paperwork process makes reviewing and signing documents the most time-consuming part of the closing.

If you familiarize yourself with the closing documents in advance, the process will go faster and more smoothly. Here are some tips about what to look for—or watch out for—in the paperwork you’ll see at closing.


What Is a Closing?

The “closing” is the last step in buying and financing a home. The “closing,” also called “settlement,” is when the house buyer and seller fulfill all of the agreements made in the sales contract. In more literal terms, it is about the transfer of money and documents so that you, the seller, can transfer ownership and possession of the property free and clear to the buyer.

To make this process secure and enable all of the parties involved to treat all of the closing tasks as having taken place simultaneously, you will most likely hire a disinterested third party, called a “settlement agent” or “escrowee.”

The escrowee will take in all of the documents, money, and other items needed to close from the parties assigned to furnish them, pay out the money necessary to clear title, pay off all of the old lenders and lienholders, and pay the sales agents and other service providers.


1. Closing Disclosure: All the Details of Your Loan

Required by federal law for all home purchases, the Closing Disclosure is designed to make sure that the buyer understands exactly what they are getting into when you sign they sign the mortgage loan. The Closing Disclosure is a five-page form that describes, in detail, the critical aspects of your mortgage loan, including purchase price, loan fees, interest rate, real estate taxes, closing costs and other expenses.

To ensure that you have time to review the Closing Disclosure carefully and ask any questions, your lender is required to get it to you at least three business days before the closing. It’s a notice, not a contract, but you might be asked to sign a form acknowledging that you received it or to sign the document itself when you’re ready.


2. Mortgage Loan Application: A Simple Double-Check

Unless you do not need to finance your home purchase, you will fill out a mortgage application with information about each borrower, income sources, employment, liabilities and assets as well as made declarations your lender asked you about. Behind the scenes, your lender had filled out a comprehensive loan application that included the loan terms, information for the purchased property, your housing expenses and existing debts along with other transaction details. You’ll find a copy of your signed application in your real estate closing paperwork, and you should check it to make sure the information is all still accurate.


3. Mortgage Promissory Note: Your Commitment to the Loan

The mortgage promissory note acts as the official promise that you will repay your mortgage according to its terms. It contains basic information such as the loan’s interest rate, original principal amount, payment dates and loan term. It will also show you what you can expect to pay in total over the term and whether your payments stay fixed or are subject to change. Lastly, the note mentions the penalties for not making your mortgage payments on time and informs you how to make payments, including where you can mail them in or pay electronically.

Besides listing all the borrowers, it covers the following:

  • The amount you owe, the principal
  • The interest rate of the loan
  • The dates when the payments are to be made
  • The total you’ll pay over the life of the loan
  • The length of time, or term, for repayment
  • Whether and how the payment amounts can change
  • Where to send your payments
  • What happens if you don’t make your payments


4. Mortgage: Putting Up Your House as Collateral

The mortgage provides security for the loan and is legally binding. That means that when you sign, you are putting up your house as collateral. If you default on the mortgage note, the lender can foreclose on your home, sell it, and use the money to pay the loan balance and foreclosure costs.


5. Title Documents: Clear Rights to Your Home

In real estate, “title” means you own a right to a property, not that you own it since you will not truly own it until you pay it off, at which point you will possess both the title and the deed.

There should not be any surprises here. By the time you are at the closing table, a title company has already researched the title and issued title insurance policies to both your lender and you. You just need to confirm that the title is as expected. If there are any issues, closing will stop until the title is clear.


6. Deed: Proof of Your Ownership

The deed transfers the property title from the seller to the buyer and usually describes the property in detail. The buyer does not sign this document; the seller does. At the closing, it will already be signed and notarized, naming any other buyers as the new owners. Make sure it is accurate. Disputes about ownership are often settled based on whose name is on the deed.


7. Affidavits: Sworn Statements

Affidavits are sworn, notarized statements that verify information. You might need to sign several; you can ask your closing agent about this ahead of time.

At a minimum, you will likely have to confirm your legal name and state that to the best of your knowledge, all the information you are providing is true. Any inaccurate information could cancel your loan and lead to criminal penalties.


8. Initial Escrow Disclosure: Your Other New Expenses

A few days after you submit your mortgage application, your lender responds with a loan estimate form that shows your mortgage payments, interest rate, any relevant expenses, potential closing costs and services that you may have to pay for. Your closing package will contain your loan estimate document for your reference so that you can compare it against your mortgage promissory note and closing disclosure. This will ensure that the loan you are taking on lines up with the terms you originally agreed to.

Similar to the loan estimate form, your lender usually sends the closing disclosure a few days before your scheduled closing. It may include updates such as a new interest rate, if rates have changed since the original estimate. It will also have your final closing costs in an itemized listing, projected payments, loan disclosures, contact information for all parties involved in the transaction and detailed transaction information.


9. Transfer Tax Declaration: Might Include More Fees

Many states, counties and municipal governments impose a tax on property transfers. If this applies to you, both you and the seller must sign declarations that disclose the purchase price and calculate the tax.


Keep Copies of Your Closing Paperwork

Conveniently, most closing agents provide digital copies of your entire closing packet. You will also want to keep the original documents in a safe place, as you might need to provide them when you later sell the house, have to make an insurance claim, or are in another situation where you need to prove ownership. The most important originals are the purchase agreement, deed, and deed of trust or mortgage. In the event originals are destroyed, you might be able to get certified copies of these documents from the lender or closing company, but you don’t want to rely on others’ recordkeeping systems unless you have to.


Why Choose Citrus Heritage Escrow?

When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you have gained the maximum benefit from your home sale or purchase.

Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200