To reach your goal of homeowenership, you've signed dozens of documents — probably more than a few times for various companies. You’ve repeatedly confirmed your income and thoroughly verified your identity. You and your loan officer have met in person and/or by phone, email or text.
But first, at closing, a ream of paper is presented to you. You're probably thinking something along the lines of: “What the heck are all these documents? Do I really have to read all of them?”
Listen to dear old dad
“Like my dad says, you should read every page you sign,” said Greg Gale, senior loan officer in the Scottsdale office of The Gale Team/Nova Home Loans. “We go over the highlights and important information, along with encouraging the borrowers to read the documents. We provide copies as well for them to take home and review.”
"I always encourage borrowers to read the documents so they understand what they are signing and I encourage them to ask questions for clarity on documents that they do not understand,” added Tim Jorden, Southwest Regional Sales Manager for Scottsdale-based Homeowners Financial Group. “With that said, many of the documents are standard forms with the same verbiage that has been on loan documents for years.”
Trio of significant documents
According to Gale, the three most significant documents are the:
- Closing Disclosure
- Deed of Trust
Closing Disclosure: 'In the industry, the Closing Disclosure is known as the CD,” Jorden said. This extremely important document contains final details about the mortgage loan that you, the borrower, have selected: the loan terms, projected monthly payments and the amount of fees and other costs of obtaining the mortgage loan.
"Ultimately, this document puts a signature on the document s with all the revisions that have been made since the initial application," Gale said. For example, the new owners said they had $2,000 in their bank account but when the most current bank statements come in, they document $2,353. “We put the actual figures and account numbers on the application that they sign at closing,” Gale said.
Note: The Note contains the terms of the loan and its terms should match the information listed on the CD. “The Note is the official document between the borrower and lender agreeing to the amount that is to be paid back and at what interest rate and monthly payment,” Gale said.
Deed of Trust: Finally, the Deed of Trust is a document used to secure a loan using real property. “They are not used in all states but they are used in Arizona in lieu of mortgages,” Jorden said. “The document will contain the amount of the loan, a legal description of the property, inception and maturity date of the loan, and the parties involved in the process.”
"The Deed shows that the parcel of land and home are now owned by the borrower,” Gale said. “Once that is recorded with the city, it’s official: You can receive your keys and move in.”