Congratulations! You’ve made it through the most challenging part of the homebuying process, and closing day is finally approaching.
As you count down the days until you’re sitting across that big table with a pen in your hand, ready to sign all of those closing documents for buyers, you might want to reel in your excitement. You’re going to be busy on closing day, and it’s always helpful to know what’s to come — because there are a lot of documents to sign!
Closing documents for buyers: The basics
You’ll need to bring or sign a whole slew of documents to complete the purchase. Here are 15 important ones to remember.
1. Photo identification
The most obvious document you need to have is valid photo identification. You need to prove your identity because you will be signing several documents (namely the title and loan documents), which will need to be notarized.
You can use your state-issued driver’s license (or identification-only card) or your passport. Emeric Szalay, a top-selling real estate agent in Indiana who works with 78% more single-family homes than the average agent in his area, shares:
“We’ve had closings that have stopped right in the middle of closing because the buyer had an expired driver’s license. They had to run over to the DMV to get it updated and then bring it back.”
2. Cashier’s check (or wire transfer)
A cashier’s check is the next most important thing you need to bring with you; otherwise, the deal won’t move forward. This piece of paper shows that you have the funds to cover the down payment, closing costs, prepaid interest, taxes, and insurance.
However, most buyers pay by wire transfer; often, writing a check isn’t an option.
“Every transaction is going to be a little different. In Indiana, if it’s under $10,000, the buyer can bring a certified check made out to the title company. However, if it’s over $10,000, the money has to be wired directly to the title company,” Szalay explains.
3. Proof of homeowner’s insurance
Lenders will need to see proof of homeowner’s insurance that’s current (many lenders require that you pay for a year-long policy upfront) and is in good standing before they grant you the loan. The amount of coverage you’ll need will vary depending on your situation. Still, at the bare minimum, lenders will require dwelling coverage in the amount needed to repair any structural damage or cost to replace the home in its entirety.
You can get a copy of your policy declaration at least a few days before closing by calling the insurance company and asking them to fax it to your lender.
4. Closing Disclosure
The Closing Disclosure is a document from your lender that breaks down the terms of the loan and your closing costs. You should receive a copy of the Closing Disclosure three days before closing so that you can review the terms of the mortgage.
You’ll also need this document when you get the cashier’s check or make the wire transfer because it will note the exact amount you’ll need to bring on closing day.
Closing documents for buyers: The big ones
When you get to the closing table (with the primary documents in hand), there are going to be many, many documents and disclosures for you to sign, particularly if you are getting a mortgage. That said, here are 11 primary closing documents everyone should expect to see.
5. Loan application
This is pretty straightforward — you’re going to review the original mortgage application, and you’ll sign it.
This document is your acknowledgment that you understand the terms of the loan and your financial responsibility to repay it.
6. Title documents
The title document gives you a list of every previous owner, and it will make sure there aren’t any liens or ownership claims on the property. If you purchased title insurance, it would be in here, too.
“Title insurance ensures the fact that there isn’t a lien on the property. If someone puts a lien on the property on the day of closing, and the title company missed it, the buyer is going to be liable for those debts” if they haven’t secured title insurance, Szalay explains.
If there are any problems with the title review, the title company will try to resolve them. There are some instances where the buyer’s agent will work with the seller’s agent to get the seller to pay their debts so the purchase can go through. Sometimes, however, if the problems are big enough, the whole deal may fall through.
7. The mortgage or deed of trust
The mortgage or deed of trust is a document that shows your newly bought house is the collateral for your mortgage loan. If you stop making payments on your mortgage, it can go into foreclosure, and the lender will seize the home.
8. The deed
If you’re a first-time homebuyer, you might think a deed and a title are the same things — they are proof that you own the property. You’re not entirely wrong, but there is a difference.
A deed is a physical document that provides a description of the property and identifies the seller and the buyer. On the other hand, the title gives someone the legal right to own and sell the property.
Note: You will receive an updated deed after closing, once it’s been filed with the county.
9. Affidavit of title
The seller provides a sworn statement called an affidavit of title, which says they have the legal right to sell the property and that they hold the title for that property. It also shows that the seller swears the facts about their property are correct — there aren’t any liens on the property, there aren’t any outstanding tax bills, and another party is not selling it.
10. Riders
A rider is also known as an addendum, and it’s pretty standard to see riders included in the sales contract.
Riders are additional terms and conditions added to the contract. The information on the rider expands or changes some terms of the transaction. When you’re looking at the riders, be sure there aren’t any mistakes or items you disagree with because the rider is an enforceable part of the contract.
11. Buyer repair requests
The sales contract should have a home inspection contingency that outlines the options both the seller and buyer have regarding repairs. If the home inspection shows significant problems with the house that need repairing, the buyer can submit a buyer repair request and add an addendum to the contract.
The seller can agree or refuse to make the repairs, negotiate to lower the asking price so the buyer can make the repairs themselves, or both parties can agree to other arrangements.
At closing, you’ll want to double-check to make sure the seller has (or will) honor the agreement as stated in an addendum.
12. Transfer tax declaration
The transfer tax declaration is a tax on the changing of ownership in real estate. This tax is generally equal to a percentage of the sales price of the home.
The party responsible for paying this tax and what it is referred to (some states may refer to this as a “stamp tax,” “excise tax,” or by another name) depends on the property’s location, but in most instances, either the buyer or seller can agree to pay it (although not every state will require this tax). Who’s responsible for paying the tax is usually part of the negotiation process before closing.
13. Escrow disclosure
If your lender is establishing an “impound” or “escrow” account in order to withhold part of your monthly payment to pay your property taxes and homeowner’s insurance, you’ll typically have to sign an escrow disclosure.
Escrow accounts are generally required on most loan types if you are putting less than 20% down. The escrow disclosure will break down the yearly cost into 12 monthly payments, and at the end of the year, the tax and insurance bills are paid from the escrow account.
You usually don’t have to have an escrow account set up if you are making a downpayment of more than 20%, but if you don’t want to pay your homeowners’ insurance or taxes in a lump sum every year, then you might want to ask about getting one established for those expenses.
Note: You will receive a more detailed escrow disclosure statement after closing.
14. Certificate of occupancy
A certificate of occupancy (or CO) states that the home is safe to live in. This document is issued to homeowners of a new construction home, or if the home will be used as a rental or investment property.
The CO will explain what the property will be used for, if the home is structurally sound, and whether it complies with all local building codes.
15. Bill of sale
The bill of sale is a legal document that confirms the property has been sold or transferred from one person to another. This legally binding document goes over the transaction details (if the seller will include or exclude items in the sale, the terms of the sale, and so on) and is used to protect either the buyer or seller if there are any issues down the road.
Remember closing documents for buyers
Here you are, at the precipice of getting the keys to your new home and starting a new chapter in life. But before you can start loading the moving van, you’ve got to make it through closing day.
You’re going to be reviewing and signing a lot of documents, and while it may be overwhelming thinking about the stacks of papers you’re going to see and sign, just remember that this is the very last step!
Make sure you have all of the required closing documents for buyers all ready to go because you don’t want anything to cause a delay on your big (closing) day.
Header Image Source: (Laura Chouette / Unsplash)