This is a good question submitted by Rick from California concerning signing final loan documents for closing his home purchase:
“Are any dangers lurking at the final signing that we should be alert to and wary of?”
My Answer: Yes, Rick, the first document you want to look at is the Settlement Statement. This is a three-page document prepared by your closing agent (escrow or title agent or closing attorney). It details all of the fees and costs for your mortgage. Turn to the last page of this document.
On page 3 of the Settlement Statement, you will see a side-by-side comparison of the Good Faith Estimate and Settlement Statement figures. The lender fees should not be increased at all, not even by $1, per federal law.
Third party costs such as title, settlement closing fee, and county recording fee must be accurate within 10 percent of the original quote on the GFE. The exception is if the loan officer gave you a quote from a different title company and closing agent than the one you ended up using.
If the fees are off by more than 10%, that is a violation of federal law, and you would refuse to sign until that was corrected. You would make a phone call to your loan officer and ask him or her to get that corrected immediately so you can complete the signing. It should take less than 30 minutes; and in the meantime, you can go ahead and sign the other loan papers.
After the Settlement Statement, the document you want to pay close attention to is the Loan Note. This is usually two or three pages. The Note tells you the interest rate, principal and interest payment, when the first payment is due, and confirms there is no prepayment penalty. If you are getting an Adjustable Rate Mortgage (ARM), then you will have additional documents detailing the terms of the ARM. Make sure you read and understand that as well.
You have the responsibility and the right to ask any and all questions you need to ask so that you understand your financing. This is a large legal commitment, so make sure you understand what you are signing.
Personally, I don’t care for the cliche “signing your life away.” That is NOT what a mortgage is! You are not signing your life away–you are signing for financing to become an owner of real property. That act should enhance your life, not take it away. When you understand the terms of your loan, you will not have a sense of signing your life away.
If you need my help in understanding your loan or to make sure you’re getting the best possible loan, please click on the page above that says Review My Estimate. I’ve helped many good people save money and gain peace of mind.
