When it comes time to close on the sale of a new home, you’ll see a lot of documents as the buyer. Last week we talked about the main real estate transfer documents you’ll see. This week, we’ll discuss the basic home loan documents used at closing, and what purpose they serve.
Home Loan Documents
Home loan documents are prepared either by the lender or the lender’s servicing agent, and serve as a documentation of the terms of your mortgage, among other things.
The note shows that you owe a debt to the lender, gives the terms of the loan, and serves as a way for the lender to collect or transfer the debt. Figures on the note include the amount of the debt, initial interest rate, rate change terms, and the place and time by which you must repay the lender. Also, if the lender sells your loan, it will give the note to the buyer of the loan.
The mortgage is essentially you saying that you’re willing to put up the home you’re buying as collateral for loan with which you’re purchasing it. A mortgage is a lien against your property, and is recorded in the county recorder’s office. A lien means that “the lender owns an interest in your property up to the amount outstanding on the loan at any given time.”
The loan application was completed long before closing, but it needs to be updated if anything has changed, for example, your financial situation.
TILA: Truth-In-Lending Disclosure
The TILA was created by the Truth-In-Lending Act and is a standardized document explaining the financial terms of your loan. This includes your APR, finance charges, amount financed, and total payments.
Other Disclosures and Agreements
There may be a number of other disclosures and agreements you’re required to sign at closing. For example, a servicing disclosure is used to inform you if a servicer will collect your payments for the lender (or where to send your payments), as well as if the lender is planning on selling your loan. A compliance agreement is used to ensure your cooperation if the lender finds a mistake in any of the loan documents that needs to be fixed.
Real Estate Closing Services from Colony Title Associates
Colony Title has been in business since 1995 and handles more than 2,000 real estate closings per year. If you have any questions or would like to speak to a representative about closing, please give us a call at 410-884-1160 or visit our website for more information.