DOCUMENTS SIGNED AT THE CLOSING TABLE

Are you wondering what type of documents you’ll be signing at your real estate closing? Are you worried you won’t understand what some of the documents are? The following is a partial list and description of the most common documents the title company and your mortgage company might have you sign:

For real estate transactions that involve an Act of Sale (also called a Cash Sale):

HUD-1 Settlement Statement - A HUD-1 Settlement Statement is a government-regulated form provided by the title company (closing agent) that itemizes all fees and charges for the buyer and seller and gives full disclosure of all monies involved in a real estate transaction. Some of these fees and charges might include: contract purchase price, agent commissions, lender fees for the loan, insurance, title company charges, abstract of title, property taxes, surveys, and recordation fees. The settlement statement outlines your debits and credits and provides each party with a “bottom line” figure.

Tax Proration Disclosure and Agreement – A disclosure that the current year’s property taxes have been prorated between the seller and the buyer. The tax proration is based upon the most recent property tax bill available.

Seller/Owner Affidavit (Inchoate Affidavit) – An affidavit signed by the sellers affirming that they are not aware of any unpaid contractors or liens filed against the property that could adversely affect the title to the property.

Wood Destroying Insect Report – A certificate from a licensed pest control inspector that describes the results of a pest inspection of the property. Ideally, the termite certificate should report that there is no visible evidence of wood destroying insects. If evidence has been found, a letter from a bonded contractor might be required stating that the structure is sound.

Act of Sale / Cash Sale – This document transfers or conveys the property from the sellers (vendors) to the purchasers (vendees). The Act of Sale will contain the “appearance” of the parties: SSN, marital status, and mailing address. It will also list the “legal description” of the property being sold and contain the “consideration” or contract purchase price for the property. The Act of Sale might include a “Waiver of Redhibition” stating that the property is being purchased “As Is”. There might be certain “exceptions” to the sale of the immovable property: servitudes or rights of way in favor of local utility providers or restrictive covenants for the subdivision. “Attachments” such as the property tax certificate or the survey of the property might be attached to the document when it is recorded in the courthouse conveyance records.


Following is a list of common documents your lender might send in their mortgage package:

Promissory Note – a signed promise to repay a lender a certain sum of money. The repayment is dictated by the “terms” of the note: the interest rate and length of maturity.

Act of Mortgage – This document is recorded in the courthouse mortgage records and becomes an enforceable mortgage (an “encumbrance”) against your property in favor of the lender. The mortgage acts as a “security device” for the lender; It’s a non-possessory right created over property to secure the performance of an obligation – the promissory note. If the obligation is not met (the debt is not being repaid), the mortgage gives the lender the right to have the property seized and sold at a public auction (Sheriff’s Sale) to satisfy the debt. There are many different types of mortgages: Conventional, Adjustable Rate, Collateral, Home Equity, and Multiple Indebtedness, as well as many others. Your lender can explain the benefits and details of each mortgage repayment scenario.

First Payment Letter – This letter itemizes your monthly mortgage payment and shows you when your first payment is due. The breakdown of your total monthly payment will include the principal and interest payment as well as any amounts collected and held “in escrow” to pay the property taxes, hazard and flood insurances, and private mortgage insurance (if required). It should also contain the lender’s address and your loan account number. Sometimes the bottom portion is a “coupon” that can be used to make your first payment.

Escrow Account Disclosure – A disclosure of the escrow account showing an annual accounting of the account. It shows the total amount collected and deposited into the account as well as the disbursements out of the account for insurance, taxes, and mortgage insurance (if required). It will disclose the “cushion” selected by your lender. This is a two or three month buffer held in the account should the property taxes or hazard insurance premium increase.

Name/Signature Affidavit – Sometimes referred to as an “Also Known As” Affidavit, this document might reflect variations of the spelling of your name in the event the mortgage documents refer to you with variations in your name – with only initials, for example.

IRS Form W-9 Request for Taxpayer Identification Number and Certification – A governmental form used to confirm your Social Security Number.

IRS Form 4506 Request for Copy of Tax Return – A governmental form used to obtain official tax returns from the IRS in the event the lender requires original, certified copies of income tax returns.

Uniform Residential Loan Application (Fannie Mae Form 1003) – A finalized version of the loan application that contains information that you provided to the lender or information that they’ve gathered through a credit report. Sometimes the balances might not be exact at the time of closing because they might have been originally obtained in the early stages of loan approval.

Document Correction Agreement – This document allows the lender to make “minor” typographical corrections without your knowledge. It does NOT allow the lender to make any changes of money amounts, percentages, or other financial matters. The agreement further states that you agree to execute a corrected version of any documents if the lender is not comfortable making the correction on their own.

Lender’s Privacy Policy – A disclosure that states that the lender does collect private and personal information about you, but they do not sell it or transfer it to outside companies.

Servicing Transfer Disclosure – The lender has a right to sell your loan to another company. This will not change any of the terms of your mortgage. The only effect this will have on the borrower is where you mail your monthly mortgage payment. This disclosure tells the borrower the frequency in which the lender transfers their loans.

Flood Hazard Determination Certificate – A flood certificate is obtained to determine which flood zone the property is located on the FEMA (Federal Emergency Management Agency) flood maps. Typical zones are: A, AE, B, X, X500. In the X and X500 flood zones, flood insurance is not required (although always recommended). If your property is located in the A or AE flood zones, your mortgage company will require flood insurance to be maintained on the property. You might consider ordering a “Flood Elevation” certificate in order to get a discounted rate if your house’s slab is above a certain level.

Notice of Right to Cancel - If you are placing a mortgage on your home, you have a 3-day “Right of Rescission” to cancel the transaction. Because of this “window of opportunity” to cancel your transaction, the title company must wait this time period before they disburse any funds to you. After it is determined that you have not rescinded, we can issue a check to you if you are getting money back on your mortgage. Investment property does not have this 3-day Right of Rescission.

Federal Truth in Lending – This document is a summary of some of the key aspects of the loan. It will contain an “APR” (annual percentage rate) which will be higher than your interest rate on your promissory note. This APR is the “effective” rate which shows the total cost of the loan. It takes into consideration all of the fees/costs associated with the loan. It is a method of comparing loans from different lending institutions. The Federal Truth in Lending (sometimes called the “TIL”) will also disclose the first payment date and total number of monthly payments. The bottom section will disclose other important aspects of the loan: whether it is a fixed or variable interest rate, that you are giving security (i.e., filing a mortgage against your property), that you must maintain adequate hazard insurance, that there is a penalty if the monthly payment is received after a certain date, and whether or not the loan has a prepayment penalty if cancelled within a certain amount of time.