The flood of paperwork to be signed during the closing process is considered one of the most stressful and confusing parts of the housing loan process. Borrowers can expect to be presented with at least a dozen pieces of paperwork to be signed at the closing process.
How do they know what they are signing? Like anything else, people need to set their priorities. While some of these documents are important and require careful deliberation, others are routine paperwork and can be immediately dispensed with. The big question is, which is considered a priority and which is not?
The good news is that government laws provide individuals with the right to receive copies of all paperwork twenty-four hours in advance of closing the lån, so they can check them to make sure everything is in order. The bad news is that a lot of people fail to benefit from this right, trusting that everything will be in the right order.
Important closing documents
The necessary paperwork are going to be the ones that will set the actual terms of the loan transaction itself. These include Truth in Lending disclosures, Closing Disclosure (HUD-1), and the housing debenture agreement itself. Copies of this paperwork should be checked properly beforehand, as well as the actual document they sign should be reviewed multiple times before the process ends.
Closing Disclosure is a detailed listing of all charges of the transaction. It specifies who is paying for these things – for instance, the seller usually pays some costs associated with the home sale. The division of loan costs between seller and buyer – like county and city taxes – needs to reflect what was agreed upon during the sales negotiation and what was written on the contract. Also, payments to the lending firms should match those provided by GFE – and are marked with the designation from the Good Faith Estimate.
The HUD-1 also details some of the third-party charges like different types of insurance, the commission of the real estate agent, as well as various taxes people need to pay. These things are usually listed on the GFE, although they can differ by as much as ten percent from those numbers.
Want to know more about GFE? Visit https://www.fha.com/define/good-faith-estimate to know more.
The final TIL or Truth in Lending disclosure details the terms of the home loan, including the interest rate, the amount borrowed, total interest to be paid over the debenture term, and payback term. Some of these things will correspond to numbers on the Good Faith Estimate and should match.
The Truth in Lending also provides figures called Annual Percentage Rates, also known as APRs. It is a way to express the total costs of debentures. Basically, the Annual Percentage Rate is the loan’s IR plus adjustments that reflect the costs of fees paid to get the debenture.
Another significant item is the actual housing loan agreement; usually in two components. The first component is the actual loan note itself, which state the debenture term, gives people the funds, and commits them to repay it. It also sets forth things when payments are due, penalties for overdue payments, grace periods, as well as the steps lending firms can take if borrowers fail to make on-time payments.
The second document is called the deed of trust. It establishes the right of financial institutions to repossess the house if the borrower violates the terms and conditions stated on the contract, most notably by failing to pay on time the insurance, taxes, and most importantly, the housing loan. Lastly, the deed is a document that actually transfers the property’s ownership to the buyer.
Want to know more about property taxes? Check out https://www.tax.ny.gov/pit/property/learn/proptax.htm to find out more.
Although it is pretty straightforward, it is imperative to ensure everything is properly dealt with or in order, including the seller’s name, the name of the buyer, and the full description of the house. People will not take the home document with them after the closing, but it will be sent to them once properly recorded with the county.
Another thing that needs to be paid close attention to is final notifications. It spells out particular conditions in the debenture or property purchase that cannot be covered by other agreements or spelled out properly and separately for emphasis.
It will include the notice of the right to cancel, which provide individuals three business days to cancel refinanced debentures and recover their money if they change their mind for any legitimate reasons, as well as the notice of no oral agreements, which means any verbal promises from the lending company will not carry any significant weight.