So, what exactly are all these papers that you're signing at closing?

You've done a lot to buy your new home. You’ve looked at house after house, made offers and counter-offers, signed a final contract, applied for a mortgage, been through qualification and underwriting – and at the end of it all is closing.

And it's at closing that you’re presented with a small mountain of paperwork; a stack of legal documents that, while not quite as high as the Mallory Step on Everest, still can be quite daunting nonetheless.

Closing can be intimidating, especially for first-time homebuyers told by their mothers never to sign anything without reading it first. Even for experienced homebuyers, signing the closing papers can be nerve-wracking, and they'll often comment that they feel like they’re signing their life away without knowing exactly what they are signing.

There is some good news about closing though: First, there really is no document which signs your life away. Really. The second is that many of the documents are fairly standardized, and are signed at each and every closing.

The documents typically signed at each closing include:

• The HUD-1 Settlement Statement: Also known as the closing statement (or more commonly and simply “the HUD”) this documents sets forth all the financial terms of the transaction and includes how much money the seller receives, the real estate agent commissions, and the amount the buyer must bring to closing. A sample HUD can be viewed here.
• The Note: The promissory note is the borrower’s formal promise to repay the money that the bank is lending. It shows the amount of the loan, the interest rate, the length of the loan, and the amount of payments.
• The Deed to Secure Debt: Also known as the Security Deed, this is the document which pledges the property as collateral for the loan. In other words, the security deed is what gives the lender the right to foreclose if the loan isn’t paid back.
• The Truth in Lending Statement: Also known as the “TIL,” the truth in lending statement shows the annual percentage rate of your loan. The annual percentage rate is not your interest rate, but instead is your loan interest rate plus the finance charges you’ve paid. It also shows the total amount you would pay if you hold out the loan for its full term.
• The Occupancy Affidavit: A document by which you swear that you will occupy the property as your primary residence. Alternatively, if you are not planning to live in your new house, it will disclose that it is a second home, vacation home, or investment property.
• The Aggregate Escrow Disclosure: If you are escrowing for taxes and insurance, this document shows how those amounts are calculated, when they are being collected, and when they are being paid out on your behalf.

There are also a number of other documents that are typically signed at every closing: papers by which you swear that you still have your job, promise to cooperate with your lender if documents need to be corrected later, and acknowledge that there are no side agreements between you and the seller. On top of that there are usually other affidavits, certifications, and disclosures which may required by your specific lender. Again, these are all typically very standardized documents and do not differ greatly from closing to closing.

If you’d like to review a sample lender’s loan package before closing, simply click here for a conventional loan and here for a FHA loan. These sample packages include documents both for you and your closing attorney. While the actual papers you sign at closing may be a little different, the form and substance of the documents you sign should be fairly similar to these.

We'd love to be your closing attorneys. Want to know more? Contact us and we'll be happy to discuss how Harlan and Associates can be of service to you!