Document #1 - The Closing Disclosure (aka CD)
Review your Closing Disclosure thoroughly before you arrive to the closing table. Your Closing Disclosure contains most of the important points of 3 other key documents – the ALTA Settlement Statement, the Note, and the First Payment Letter. You should receive a copy of your Closing Disclosure document at least 3 days prior to your closing date. During that time, you should look to identify any issues on the CD, and to clear them up with your loan officer. When the notary signing agent / title closer reviews the CD with you during the closing, it should be all "old news" and no surprises. The better your understanding of the terms on your Closing Disclosure, the faster the closing will be.
Document #2 – The ALTA Settlement Statement (aka The ALTA, aka the Settlement Statement)
ALTA is an acronym for American Land Title Association. The Settlement Statement, which is a document that ALTA provides the title industry a template for, contains all the costs and expenses of your loan and are broken down on a line-by-line basis, much like an Excel sheet. The Settlement Statement has a long list of items such as: Lender Credits, Loan Amount, Points (if any), the Origination Fee, Appraisal Fee, Impounds which is another word for property taxes and homeowner’s insurance, and all the title & escrow / settlement charges. It also lists any realtor commissions, attorney fees, government recording fees, payoffs typically if you are doing a refinance, and yes, the amount due To and From the seller & buyer/borrower.
A good notary signing agent or title closer will go over each of those items on your Settlement Statement, and make sure you understand the costs associated with your loan.
Document #3 – The Note
The Note which is sometimes called a Promissory Note, is a document that states your promise to pay the mortgage to your lender. This is really the most important document of your entire loan package.
The Note has details about your mortgage, such as the amount you owe, the name of the mortgage lender, the interest rate of the mortgage, the dates when the payments are due (including the dates of both your first and final payment), the principal and interest payment amount, and whether it is a fixed or variable payment. The Note also explains the penalties of failing to make your monthly mortgage payments, such as the late fee which is expressed as a percentage of your monthly principal and interest payment.
Make sure you clearly understand the terms of the Note before proceeding.
Document #4 – The First Payment Letter (aka Payment Letter)
The First Payment Letter is the document that answers the question “What exactly does my monthly payment consist of?” This document gives you a clear breakdown to the penny of your initial monthly payment. Your total monthly payment will be broken down using the following list: Principal and Interest, Estimated Taxes, Hazard Insurance (which is another term homeowners insurance), Flood Insurance, Mortgage Insurance, and City Property Tax.
The First Payment Letter also tells you when your first regular payment is due, and whether your lender will accept partial payments. It also reiterates your loan amount, and your interest rate, as well as the name and contact information of your lender. Most times you’ll also see two or three payment coupons, which you’ll receive should you want to mail in your monthly payments. A good notary signing agent or title closer will go line-by-line on the breakdown of what your monthly payment consists of to make sure you are clear on the numbers.
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*This blog is strictly the opinion of Michael A. Malleo and not those of any of our affiliates.
Malleo Financial Services LLC cannot and will not give any specific tax or legal advice.
Please consult your tax professional or legal professional for such advice.