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Dealing With Documentation
At the table, you will be asked to initial or sign a number of documents during the closing.
Important Documents To Know
Loan Estimate — A written estimate provided by the lender of all charges—including closing costs and pre-paid and escrowed items—you are likely to pay at closing. You should receive this within three days of submitting your loan application. You’ll want to compare your estimate with the Closing Disclosure (see below) before your closing date.
Note — A promissory note that states your intention to pay a specific sum of money at a specified rate of interest within a fixed period of time. This is your commitment to the lender to repay the loan.
Deed of Trust (Mortgage) — A legal document that gives the lender the right to take possession of the property if the borrower fails to pay off the loan. In some states, this is known as a “deed of trust.” This is the document that officially puts the lien on the property for the amount borrowed.
Closing Disclosure — Also called the “settlement statement.” Provides an itemized breakdown of all costs and disbursements associated with the sale of the home. You are entitled to review this document before closing—compare it with your Loan Estimate and resolve any issues before settlement. The lender will require you to acknowledge that you received it for review prior to settlement
Closing Costs – These charges will vary widely from state to state and lender to lender, but will likely include:
Points — Money paid by a borrower to the lender in exchange for a lower interest rate. Each point equals 1% of the loan amount.
Mortgage Application Fees — Charged by the lender to cover the costs of processing a loan application. It’s sometimes paid up front at the time of application; otherwise, it’s included in the closing costs. Sometimes this fee is called “Origination Fee” or “Underwriting Fee”.
Appraisal Fees — The cost of paying a professional to assess the fair market value of the property. Usually required as a condition of the loan.
Inspection Fees — The fees charged for home, pest and other inspections. Lenders sometimes require inspections to verify that the property is in good condition and will retain its collateral value.
Title Search Fee — Paid to your title company to verify that the home’s title is “in the clear,” (i.e., that there are no liens or outstanding claims on the property).
Settlement Fees – These are the fees paid to the Settlement Company for the work done to ensure you obtain clear title to the property. This can include courier fees, FedEx fees, wire fees, document preparation fees, and others. Most Settlement Companies have set fees for their services.
Title Insurance Premium — The lender’s policy covers only the lender and is required in most cases. A buyer’s policy is optional but highly recommended and is usually very affordable if purchased at the same time as the lender’s policy.
Recording Fees — Charged by the local recording office to make the transfer of property a matter of public record.
Pre-paid Property Insurance — The first full year’s property insurance premium, paid in advance to the homeowners insurance company.
Pro-rata Property Taxes — An adjustment to ensure that both the seller and the buyer pay their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property.
Pro-rata Interest — An adjustment to cover the interest on the loan for the number of days until the first payment is due.
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