With a mortgage comes paperwork, and a lot of it. This includes paperwork submitted by the person attempting to qualify for the loan, and paperwork the applicant must receive, sign, and submit. Documents the lender requires include proof of assets, income, credit reliability, and other relevant financial information. To summarize: you might be tempted to just skip over the fine print, sign, and be done with it. But here are three parts of mortgage paperwork you absolutely can’t miss.
Loan Estimate and Closing Disclosure Information
The lender should provide consumers with a Loan Estimate within three days of the consumer having applied. Look for loan terms, payment projections, and itemized closing costs. The lender will provide the Closing Disclosure at least three days before the mortgage is due to close. It includes a breakdown of buyer costs.
This gives the buyer three days to digest the information before making the final decision to close on the loan. Those applying for a loan should spend quality time reading and examining everything in the paperwork. If the loan applicant agrees to close, they will need to sign the complete set of loan documents.
Promissory Note
The note is the applicant’s loan contract, and contains all the terms of the loan. It includes a breakdown of payment rates, payment intervals, and any payment changes that will occur along the way. The note will also reveal if there are any penalties incurred should the applicant pay off their loan early. The note also places the home up for security in case the applicant defaults on their loan.
Mortgage Pledge and Deed of Trust
Both the deed of trust and mortgage pledge the property as security in case of a payment default. It is up to the loan applicant to learn which states require a mortgage or deed of trust. A mortgage or deed of trust contains several occupancy provisions. If the residence is to be owner-occupied, the buyer must move in within 60 days of closing.
The home should serve as that person’s primary residence for at least one year. After this period, the owner can use it as a second home or rental property. If the loan is non-owner-occupied, then the owner is free to convert their home to owner-occupied or a second-home status if they choose to.
Mortgage paperwork can be a dry read, but it’s for your protection; the government requires that lenders provide loan applicants with important disclosures 72 hours after signing for the loan, as well as during and after the application and funding process. Staying in the loop can make the whole process go a lot smoother for both lender and applicant. If you still have difficulty understanding the verbiage, consider getting help from a real estate attorney.
After all is said and done, file your mortgage paperwork in a safe place. This way you will always have it on hand for future reference, and it will prove an important resource when filing for a reverse mortgage.
