Buying Your First Home : Part 5

Closing your Mortgage Loan

When it comes time for your mortgage loan to close, it’s important to know what to expect with regards to closing costs, the Promissory Note, Deed of Trust, recording of the Deed, funding of the loan, and transfer of ownership. The following can assist you in preparing for the final step in the mortgage acquisition process. Of course, if you have any questions at all, feel free to call or email me.

Closing the Mortgage Loan

Once your property is appraised and the financing arranged, a date is set for Closing Day, also known as Settlement. It’s the day you sign your loan documents and the property officially becomes yours. Depending on your schedule, you may sign your loan documents and related paperwork at the escrow office, or they may be delivered to you by a mobile notary public who will oversee the signing process. The escrow officer or Notary will ask you to sign the Promissory Note agreeing to repay the loan and a security instrument (Deed of Trust) in favor of the lender which makes the property the security for the loan. If a purchase, the escrow officer will have the Seller execute a Deed to convey title to the property over to you. Once the documents are signed you’ll pay the balance of the down payment and your share of the closing costs if you haven’t done so already. After closing, the escrow officer will send the Deed of Trust to the County Recorders Office for recording. Once recorded, the Deed will be mailed to you as the “grantee” and the Deed of Trust is reposited with the lender. The Deed of Trust remains on record as a lien against your property until your loan has been paid in full.

Mortgage Closing — Your Important Papers

At closing you will receive important papers for your records, such as any written warranties, receipts for the payments you made, Title Insurance papers and a Settlement Sheet (known as HUD-1 Statement). Your HUD-1 Closing Statement will show the amounts you paid for the down payment (if any) and other settlement and closing costs, including amounts you have already paid. Be extra careful not to lose your HUD-1 Closing Statement. It can be a valuable statement during tax time for deducting certain costs, depending on the loan you’ve received.

The Promissory Note which you will sign at closing is a negotiable instrument which the lender can sell, assign or transfer to another investor without your consent or prior knowledge. If this happens, you will receive instructions as to who and where to make your new mortgage payments. However, your rights and obligations under the Promissory Note remain the same as do those of the holder of the loan. For example, you may purchase your home through Down-and-Out Savings Bank. Six months later, you receive a notification from a “Washing Machine Bank” that you are to mail your mortgage payment to their address. You may assume, therefore, that your loan has been sold to Washing Machine Bank. You still have to make your payment, in full and on time. It’s a good idea to verify that your payments are being received and properly credited whenever your loan changes lenders, at least for the first few payments. A secondary lender sometimes purchases hundreds of new loans at once, but it’s still your responsibility to make sure they handle your account with the same effectiveness as the previous holder.

As always, feel free to call or email me with any questions you may have about obtaining a loan.