Buying a house for the first time can be a real roller coaster ride, with a plethora of unfamiliar terms and legal documents. Hopefully, your real estate agent will be there to hold your hand and guide you through it all. The closing of your home sale is a legal proceeding. Unless you're paying in full, you typically commit to a mortgage. Either way, the title to the property is transferred to you at closing. To get to that point successfully, however, many documents must come together. The details vary among states, but certain elements are common to real estate closings.
To get the ball rolling, both buyer and seller must sign a contract that spells out the accepted sales price and any good faith deposit required. Read the contract carefully -- it details any contingencies that must be met by either buyer or seller, such as a successful home inspection or your ability to secure financing for the purchase of the home. Your closing package will also contain a copy of your original loan application and a Good Faith Estimate disclosure, which is mandated by the federal government through the U.S Department of Housing and Urban Development. The settlement statement will show you what you can expect to pay for your loan, including points or interest rate, loan origination fees or any prepayment penalties or balloon payments due at the end of loan. You'll also receive a final HUD-1 Settlement Statement at closing.
Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act document acknowledges that you have been informed about how the closing process works, and that you understand your closing documents and obligations related to your mortgage. This document is to protect consumers from abusive or predatory lending practices.
The deed is the most important document you will receive in your closing package. It includes the name of the seller and buyer, a description of the property, including plat or parcel number, and a statement from the seller that transfers all rights, claims or stakes in the property to you.
Final Truth-In-Lending Document
Costs for a mortgage can change over the course of escrow. The finalized truth-in-lending document summarizes the cost of your loan and your annual percentage rate with consideration to any modifications that may have occurred between the time you signed your original application and the date you close the loan.
The mortgage note is the document that spells out the conditions and terms of how and when you will make your mortgage payments to the lender. At the time of closing, the lender requires you to pay the interest that accrues in the period from the closing date to the date the first month's payment is due. This figure will be included in your closing package.
Right to Rescind
Signing a mortgage note is a huge commitment. A "Right to Rescission" document gives you with three business days to cancel the loan for any reason. This time frame is considered a "cooling-off" period that provides you with a way out at no cost if you change your mind.
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