When you purchase a home, condo, or co-op, you will likely
sign—and be sent home with—a mountain of documents. Some may be in digital form, but some may be on old-fashioned paper. Should you keep these?
On the whole, yes. They contain key information about your ownership, and in
some cases will help you prove to the world (should the need ever arise) that
the home is yours.
Let’s take a closer look at what you will likely receive.
These will likely fall into two categories: documents relating to your mortgage
loan (unless you paid all cash!) and documents relating to the transfer of the
Closing Documents Relating to Your Mortgage
Below is a summary of the main documents your lender will
give you (most likely via your attorney or escrow/title agent). However, there may
be more. For instance, your lender may ask you to sign an affidavit promising
that you will live in, not rent out, the house.
note, or “Note.” You’re stating that you’re borrowing X amount of money and
personally guaranteeing to repay it.
or deed of trust. Here’s where you agree to have a lien put on your house
as security for the loan. It turns your house into collateral, which the lender
can claim in foreclosure if you fail to repay or to otherwise follow the terms
of the promissory note (you “default”). The lender will record your mortgage with the
appropriate local government office.
- UCC-1 Financing Statement (co-ops only). Since
co-op financing involves no mortgage, your lender may instead fill out and
record this document, to show its claim on your property interest.
- Truth-in-Lending (TIL) Disclosure Statement, or
“Regulation Z form.” You should have seen an earlier draft of this, within
three days after applying for the loan. Here, the lender will break down all
the payments you’ll make in connection with your loan. It will confirm your
interest rate, the annual percentage rate (“APR”), and the total cost of the loan
over its life.
- Closing Statement, Settlement Sheet, or HUD-1
Settlement Statement. This is the statement described above, usually prepared
by your closing agent using a HUD-1 form. It itemizes each payment to be made
by you and the seller, not only for the house, but for other costs such as
services performed in connection with the sale, insurance premiums, paying off
liens, and more. (The seller will need to sign it, too.) Before stuffing the
HUD-1 statement into your files, check whether your closing agent included a
refund check with it (for any extra money that you deposited ahead of time).
- Monthly payment letter. This tells you how much
money you’ll pay in monthly loan principal and interest. It may also include
amounts that your lender requires you to put into escrow each month for payment
to third parties such as the tax collector or insurance companies (homeowners’ or
PMI). Your closing agent will take care of setting up this account on closing
Closing Documents Related to Transferring the Property
Another important set of closing documents serves to
transfer the property from the seller to you. At a minimum, these include the items below,
though others may be added depending on where you live, for example, to account
for local transfer taxes. Some documents you won’t even have to sign; you’ll
just receive them from the seller, such as perhaps a certificate saying that the house has
smoke detectors or a certificate of occupancy showing that the house has
passed a municipal or local inspection for basic habitability and legal compliance.
- Deed (or “warranty deed”). The seller signs this
to tell the world that title of the property has been transferred to you, the
new owner. (The deed also states the purchase price, or enough information that
the price can be figured out—which is how services like Zillow obtain this
information.). Your closing agent will, as the last step in closing on the
property, file a copy with the appropriate public records office.
- Co-op buyers only: stock certificate and
proprietary lease. Instead of a deed, co-op buyers receive a stock certificate
indicating how many shares they own in the corporation and a proprietary lease
outlining their rights to live in a certain unit. Your lender will probably
keep these in its files.
- Bill of sale. This document attests to the
transfer of any personal property from the seller to you. In other words, if
the sale includes any nonfixtures such as a children’s swing set, curtains, or
a floor rug, the bill of sale creates a record of this agreement.
- Affidavit of title and ALTA statement. Here, the
seller swears to the title insurance company to have done nothing to cloud the
house’s title and to know of no unrecorded contracts, easements, or leases
regarding the property. The seller signs the affidavit, but both you and the
seller sign the ALTA statement to finalize your request for title insurance.
Once all the documents are signed, you will be given a
complete set for your records. Some closing agents will put them in digital form for
you. Keep everything in a safe place, such as a safe deposit box. Don’t assume
that your closing company will keep a copy for you—they are allowed to toss
most of your records after five to seven years.
For more information on the closing process, see Nolo's articles on Escrow and Closing.