Closing is a legal procedure to complete a mortgage for a home loan. Some lawyers refer to closing as "passing the papers," because that's what you do -- pass papers from one party to another until they're all signed by both the borrower and the lender. It's easier on a refinance if you're dealing with the same lender. In those cases, a notary public or closer may just come to your house and have you sign papers. The closer will keep track of all the documents and hand them to you to be signed in the proper order.
If you refuse to sign closing papers, it stops the process. You won't get the refinancing. The lender will keep the money and you'll continue with the existing mortgage until you work out another refinancing or fix whatever problem caused you to refuse to sign.
Federal law gives borrowers a "right of recession" or the right to back out of a mortgage loan without penalty in some cases. You don't have that right if you're refinancing with the same lender; you do if the refinancing is with a new lender. That gives you three days to back out of a loan, even if you've already closed it. But that right can be a tricky process and if you have a question it's better to not sign until the issue is resolved.
Refuse Incorrect Information
Refuse to sign closing papers if the terms or conditions are not what you understood. Verify that all interest rates, length of mortgage or other aspects are what you expected. Anything a lending agent told you is meaningless; it's what's on the closing document that counts. Never sign papers with the name, social security number or other essential information incorrect. The closing agent should verify all information before handing you the paper, but read it yourself before you sign.
You should have been given an estimate of closing costs before you are presented with the closing documents. If there are any changes or discrepancies, don't sign. This includes such things as transferring escrow balances to pay taxes and insurance, appraisal fees, charges for filing documents and so on. Don't sign if the figures on the closing document are different from the estimate.
Change Your Mind
Don't sign closing documents if you just changed your mind about refinancing and decided you are better of with the loan and terms you have. Once you sign, you're committed, unless you qualify for the three-day recession. It's safer not to sign and postpone closing rather than try to rescind a loan.
- Bankrate.com: Right of Rescission Lets You Back Out of Some Loans
- Great Midwest Bank: Closing and Beyond
- The Federal Reserve Board: A Consumer's Guide to Mortgage Settlement Costs
- Easier Home Loans.com: Close the Loan
- EZ Credit Mortgage: Mortgage Guide: Refinancing Your Home
- Austin Home Loan: Loan Closing