Closing Documents

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After making that all important decision to shop for and buy a new home you are then faced with the application and loan process.  Home closings require a significant amount of documentation and paperwork.  You will be asked to produce a considerable amount of documentation.

Your new mortgage lender must receive a first mortgage on your property. Consequently at closing, all other mortgages or liens, including home equity lines, must be paid off or subordinated. To help ensure your closing is not delayed unnecessarily, provide a realty title with the lender’s name, address, telephone number and loan number as soon as possible. Provide information regarding tax liens or utility financing statements. Some mortgage lenders require a written request before releasing payoff information.

Sometimes other creditors, like lenders with credit cards or unsecured lines of credit, must be paid off at the closing, either to consolidate debt or to qualify a party for the new loan being made. Information regarding these accounts, such as lender’s name, address, telephone number and account number should be provided as soon as possible.

At the closing, your lender may required a current letter from a licensed pest exterminating company stating that there is no active infestation of termites and that there is no damage from prior infestation (or in the case of damage, that such damage has been corrected). Typically, the seller (in the case of a purchase) or the borrower (in the case of a refinance) will obtain this letter; however, the contract for sale may provide otherwise.

Some lending programs require a current survey or mortgage loan inspection of your property. This drawing serves to locate the improvements on the land for the lender’s purposes only. A MLI is not a boundary survey and should not be relied on for locating exact property lines. If an MLI is required, the lender or closing agent will order the MLI from a licensed surveyor early in the closing process. If a survey or MLI of your property has recently been made, advise the closing agent immediately so that it can be updated into a form acceptable to your lender and the title insurance company. If the lender does not require a survey or MLI as part of the loan documentation, and you would like to have one made, please advise the title company as soon as possible.

If it is determined that your home will be located in a flood zone, a policy of flood insurance may be required by your lender. Your regular insurance agent will be able to provide information on flood insurance and this information should be provided to the closing agent as soon as it is available. The first year’s premium will be paid in advance at the closing and monthly escrow payments will be included in your payment to the lender.

Your mortgage lender will require that you have a hazard insurance policy insuring the house against fire and other casualties in an amount not less than guaranteed replacement value. Some lending programs require new policies on refinances; others require only a certified copy of the existing policy and an endorsement changing the loss payee of the policy to show the name and address of the new lender. The first year’s premium will be paid in advance, either at the closing or outside the closing (then a paid receipt must be provided) and monthly escrow payments will be included in your payment to the lender.

If the property being purchased or refinanced is not connected to a sewer, some lenders will require that the local health authority provide a current certification that the house is served by a properly constructed and operating septic tank system. The local county health department will have the proper form and know the proper procedures. For FHA and VA loans, the letter must state that public sewers are not available, and other special requirements may apply. Ask your lender for these requirements. Normally, the seller (in the case of a purchase) or the borrower (in the case of a refinance) will obtain this letter. In order to avoid a last minute discovery at closing that the letter obtained is inadequate or unacceptable, you should provide it to the closing agent in advance of the closing, preferably as soon as it is obtained.

Many contracts provide that a one-year warranty be furnished to the purchaser at closing. The warranty, which is most often paid for by the seller, covers systems and appliances in the house for a period of one year, subject to the terms of the agreement. Your agent will be able to answer any questions which you may have about the warranty.

Lastly, funds to satisfy the terms of the closing will be required in the form of a cashier’s check.

Locating all documentation in a timely fashion and getting them to the proper locations will help your loan and approval process proceed smoothly and without complications.  No one wants surprises at closing.

Source: “Documents Required for Real Estate Closing – Realty Title Reference Guide.” Documents Required for Real Estate Closing – Realty Title Reference Guide.

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