Home Buyers: What Documents to Expect at Your Close of Escrow

After much due diligence and planning, you're finally getting close to closing on your new home. At closing, you'll pay for the property, the lender (assuming you have one) will fund your loan, and the seller will transfer title into your name. All of these tasks involve paperwork, which makes reviewing and signing documents the most time-consuming part of the closing.

If you familiarize yourself with the closing documents in advance, the process will go faster and more smoothly. Here are some tips about what to look for—or watch out for—in the paperwork you'll see at closing.

Real Estate Transfer Documents

Most of the documents related to transfer of ownership of the property must be signed by the seller and delivered to you, the buyer. It's important to review these for accuracy and completeness. With many state and local variations, the main purchase documents in your home purchase are likely to include:

• The deed. This document transfers the property from the seller to the buyer. State law dictates its form and language, but you can choose the form of ownership in which you take title: individually, in trust, in joint tenancy, or in other tenancies. The deed is given to the county recorder of deeds to record, and made public. Recording your deed puts you in the property's chain of title so that anyone looking at the county records can see that you took your title from the prior rightful owner, and therefore own the property.
• The affidavit of title or seller's affidavit. Although the actual name of this document varies by state, it is a sworn, notarized statement by the seller confirming ownership of the property and describing any known title defects such as leases, liens, or work on the property that could potentially create liens, boundary line disputes, or outstanding contracts for the sale of the property.
• Transfer tax declarations. Many states, counties, and municipal governments charge real property transfer taxes and require the buyer and seller to sign declarations disclosing the purchase price and calculating the tax.

Home Loan Documents

The loan documents are prepared by your lender or a servicing agent for your lender. How many documents you have to sign and what's in them will depend on the lender and the type of home loan. The typical loan documents are:

• The note. This provides evidence of your debt to the lender, a description of the loan terms, and a means for the lender to transfer or collect the debt. It will state the amount of the debt, the initial interest rate, the terms of any interest rate changes, and the time and place that you must repay what you owe. The note has value in and of itself, just like a check or money order. If your lender sells your loan (as is common), it will physically give the note to the loan purchaser.
• The deed of trust or mortgage. No matter whether it's called the deed of trust or the mortgage, this is your agreement to put up the property as collateral for the loan. It is recorded, along with the deed, in the county recorder's office, and becomes a lien against the property—meaning that the lender owns an interest in your property up to the amount outstanding on the loan at any given time. In literal terms, the lender can foreclose upon and sell the property if you fail to repay the loan or otherwise comply with its terms.
• Loan application. You completed a loan application form when you first applied for the loan. The lender will type a new form with the information that you gave in the original application for the closing, and ask you to review it for accuracy and sign it. If your financial position has changed since your original application—for example, you have lost your job or taken on another credit card or debt—you must inform the lender before signing.
• Loan Estimate and Closing Disclosure. These documents are designed to help you better understand the mortgage loan transaction. The Loan Estimate gives details about your loan, such as your estimated monthly payment, estimated closing costs, and the costs of obtaining the mortgage. You should have received a copy of the Loan Estimate within three days of submitting an application to your lender, and you'll likely see another copy at closing. You'll also receive the Closing Disclosure, which is essentially the Loan Estimate in final form.

Various other disclosures and agreements might be included in the loan package. For example, you'll agree in a compliance agreement to cooperate if the lender needs to fix any mistakes in the loan documents. IRS forms W-9 and 4506 allow your lender to report your mortgage interest and obtain copies of your tax returns. Servicing disclosures tell you if the lender is going to use a servicer to collect your payments, whether the lender intends to sell your loan to another lender or an investor, and where to send your payments. Tax and insurance escrow forms allow the lender to charge and hold funds to pay real property taxes and insurance premiums on your behalf.

The lender might also ask you to sign affidavits certifying that you are going to occupy the home as your primary residence, and confirming your legal name and any other names you use on accounts and legal documents.

Real Estate Title Documents

Just when you think you are finished reviewing and signing documents, the title company and escrowee will give you their documents.

The main title document is the title insurance commitment. The title insurance commitment ("Commitment") names the "party in title"—the person or entity who owns the house (it should be the seller named on your sales agreement). It will also show all of the liens or other clouds on (problems with) title. Your attorney (if you've hired an attorney) will review the Commitment to make sure that title is in the condition promised in the contract and otherwise acceptable under local law and custom.

If you are relying on an escrow company, it will review the Commitment to make sure title complies with the conditions stated in the escrow instructions created to satisfy the lender's requirements. If title isn't acceptable, the seller might have to pay off liens or obtain additional signatures. Unexpected title issues could halt or delay your closing.

The title company will ask you to sign its standard closing documents. This will include:

• an ALTA statement, which is a one-page affidavit very similar to the seller's affidavit of title;
• a judgment affidavit, where you list your recent judgments, divorces, or bankruptcies;
• a compliance agreement, in which you agree to cooperate with the title company to correct any closing mistakes; and
• a disbursement agreement, allowing the title company, as escrowee, to disburse the loan proceeds.

There might be additional disclosures informing you that an attorney is involved in the transaction, or that the lender has an affiliated businesses arrangement with the title company, or that the loan title insurance policy will not cover your interest as the buyer.

Miscellaneous Documents

Other documents buyers often review at closing include:

• The bill of sale. This transfers any personal property that is being sold along with the house, such as appliances and furniture, from the seller to the buyer. Typically, the document either lists the property to be transferred or refers to a list of included personal property contained in the sales contract.
• The certificate of occupancy. Buyers purchasing a newly-built home likely will see this document, which verifies that the property meets local building codes and is habitable. Although it's rare, in some places (such as cities in New Jersey), you might receive a certificate of occupancy when buying a used home, too.
• Proof of homeowners' insurance. Most lenders require buyers to have active homeowners' insurance homeowners' insurance until the loan is paid off in full. Your lender and closing agent will probably require you to provide proof of active insurance at or just before closing.

Keep Copies of Your Closing Paperwork

Conveniently, most closing agents provide digital copies of your entire closing packet. You'll also want to keep the original documents in a safe place, as you might need to provide them when you later sell the house, have to make an insurance claim, or are in another situation where you need to prove ownership.

The most important originals are the purchase agreement, deed, and deed of trust or mortgage. In the event originals are destroyed, you might be able to get certified copies of these documents from the lender or closing company, but you don't want to rely on others' recordkeeping systems unless you have to.

Next Steps and Other Resources

After the close of escrow, congratulations! You're now a homeowner. Although the close of escrow marks the final step in your homebuying process, you might receive some follow up from the title company. For example, you might see a (small) refund check for any amounts that you overpaid (often the result of the final accounting for the seller's final utility bills, such as water bills).

If your new property is part of a homeowner's association, you might also see some communication from the board of the association, welcoming you to the neighborhood and letting you know of rules and regulations. (Hopefully, though, you're already familiar with these from doing your due diligence during the escrow period.)

If you have any questions after the closing about the paperwork or follow up, don't hesitate to ask your attorney, real estate agent, or escrow manager. Answering questions—even after the deal is done—is part of their job. And, if they don't have answers, they'll probably be able to refer you to an expert who does.

Finally, check out Nolo's articles on buying a house. Many common questions about the process from start to finish are answered there, and you'll find the whole process easier when you've educated yourself about real estate terminology, choosing a house, getting a mortgage, and what to do as you approach closing.