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The 4 Most Important Mortgage Documents

August 24, 2016

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Regulatory changes to the mortgage process have made it so many new buyers are now working off new and unfamiliar documents. Here is a guide to the most important documents you will encounter and sign on the way to closing on your new home.

The Loan Estimate. A new form that was put into place by the Truth In Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), this document is issued within three days of applying with a lender, and it replaces the Good Faith Estimate and Truth In Lending disclosures. It will show loan terms, your projected payments over the span of a mortgage, and line item closing costs. It is designed to make it simpler to compare different loan programs and lenders so you can be sure you are getting the best deal.

The Closing Disclosure. Virtually identical to the Loan Estimate, though this form is issued at least three business days before closing on your mortgage and includes a breakdown of costs paid by buyer versus seller versus third parties. This way, the buyer can see if the initial quote and final terms have changed and easily compare the two documents.

The Promissory Note. Also known as “the note,” this document is the loan contract, containing the terms of your loan (specifying if it is a fixed rate loan or adjustable rate loan), the interest rate, payment intervals and payment changes or penalties. It also specifies that your home is security for the loan in case of default.

The Security Instrument. Also known as “the deed of trust,” this form functions as another form of documentation pledging your home as security. It also specifies if your home is going to be owner-occupied, a second home or non-owner-occupied.

There are, of course, many documents and moving parts that go into obtaining a loan or refinancing, but knowledge of the most important parts, along with a knowledgeable loan officer, can make the process far less stressful than many believe.

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