When you are closing on a home, it seems like there are a million forms to sign. From the purchase agreement at the beginning to the mortgage application forms to the closing documents – wow! I recently had a client ask what happens at closing – she was a first time homebuyer and just wanted to know what to expect.
At closing you will sign many forms – however of all the forms you sign, there are three very important ones. Since October 2015, there is now a closing disclosure instead of a settlement statement. You will sign the closing disclosure at least three business days before you closing, but it may change slightly at your closing. The CD has the numbers you need for closing, it also has your payment and other specific information about your loan. It will tell you if there is a prepayment penalty and it also will compare the fees to the loan estimate you were given at the time of loan application.
The other two important forms are the Note – this is your promise to pay back the mortgage. It contains the terms of your loan, such as the interest rate, how long the mortgage is and if it has any payment changes – such as an adjustable rate. By signing the note you agree that your home is the security for the loan. The other important document is the Mortgage. This is the security instrument that pledges the property as the collateral for the Note. The mortgage goes into more detail than the Note and explains the foreclosure process. It also states if you are signing the mortgage as your primary residence, a second home or an investment property. If you are buying a townhome or condo, there will be an addendum to the mortgage that talks about the association.
There are many other forms that you will sign at closing, but the mortgage is actually recorded at the county to show the lien against the home. One other form that you will sign is an IRS form that will allow the mortgage company to report the interest you pay on the mortgage to the IRS – that is the form that we all say is the "good form"!
Once you have signed everything at closing, the closer will copy everything for you and cut checks. You will get copies of everything you sign and you also get your house keys! Make sure that you ask questions if you have any – if the seller is there, it's a great time to find out anything you may want to know about the house (especially things like a garage door code or maybe where the mailbox is if it's an association). Once you leave the closing, you own your new home!