For many people, purchasing a home will likely be the most expensive thing they ever do. Because it is such a complicated process it can involve many outside things such as mortgage companies, lenders and even legal representation from lawyers.
With so many different people involved in a potentially complex process, it’s important that you pick out the essentials to ensure that you understand it.
One process that is important to understand is how a deal is officially closed. There are several different types of documentation involved and when they’re signed by both parties, it finalizes the sale and completes the deal. But what kind of documents are actually involved? Let’s talk about it.
What To Expect On Closing Day
When purchasing a home from someone else, the seller will typically sign a deed which transfers their rights to the buyer. The deed is one of the most important documents that closes a property sale and it’s often referred to as a closing document due to its role in the sale and purchase of a property. However, there are also closing documents involved on the buyer’s side as well.
For instance, purchasing a home is an expensive consideration that often involves a loan that has to be repaid under certain conditions. A loan used to purchase a home is referred to as a mortgage and the one offering the money is known as a lender. This involves yet another closing document that ensures the loan will be paid back.
When working with a Chicago mortgage banker or any lender throughout the country, you can expect to sign the following documents when finalizing the sale.
The Note: a ‘promise’ you make to pay your lender
Often known as “the note”, this is essentially a document that shows what you promise to pay your lender when taking out a mortgage. It shows the interest rate, details of the property and also the amount of money you’re loaning. It will also describe how to plan to pay back the money and makes you responsible for all of the payments towards your home. The note can be transferred to another party by an allonge.
Mortgage Document: to secure the lender’s rights to a property
The mortgage document is used to secure the lender’s rights to a property. It’s an agreement between the borrower and lender that lists foreclosure rights should the borrower fail to make the right payments back to the lender. This isn’t the loan itself that you will receive from the lender despite it often being called a mortgage.
This mortgage document is a security agreement that makes your home collateral for the loan should you be unable to repay it. This document is similar to your note but contains more information regarding the property.
The Deed: public record of the ownership of the property
The deed is a public record of the ownership of the property. This is recorded with the county so that there’s a permanent record of it that cannot easily be lost or destroyed. Deeds must be in writing but are often completed with printed forms.
It often includes a description of the property and signed by both parties. Deeds are the most important documents in your closing package because they contain the statement that the seller transfers all rights and stakes in the property to the buyer.
Your Closing Package
The closing process is the final hurdle before the ownership of a home is officially transferred to you. To accommodate the process, you’ll be given a closing package of important documents that includes the note, the mortgage document, and the deed.
In addition, you’ll often find other documents such as a Right to Rescission document which gives you a time frame to change your mind about the transaction, and a Real Estate Settlement Procedures Act document that informs you about your closing documents and your obligations to your mortgage.
However, the note, mortgage document, and the deed are the three main documents that will be included in your closing package. It’s vital that you read through each document and attempt to fully understand their significance before you sign them.
Due to their weight in the homebuying process, it’s common to seek advice from a trustworthy and reliable source to help you through your mortgage application and the closing process.
Having someone that can offer advice and walk you through the entire process step by step will make the process of purchasing a home a lot easier. If you’d like to learn more about the mortgage process, do check out our mortgage resources page for more information.
A and N Mortgage Services Inc, a mortgage banker in Chicago, IL provides you with high-quality home loan programs, including FHA home loans, tailored to fit your unique situation with some of the most competitive rates in the nation. Whether you are a first-time homebuyer, relocating to a new job, or buying an investment property, our expert team will help you use your new mortgage as a smart financial tool.