Mortgage documents: what you’ll read, what you’ll sign and what you’ll keep
Mortgage documents: 3 games and voila
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There are three types of mortgage documents and you will get them at different times during your loan process.
- Your Initial Loan Estimate (LE) provides loan terms and costs when you apply. Your loan application is also part of the first set of documents
- The LE is not binding, however, until you sign a rate lock-in form, which commits the lender to a certain program, at an established rate for a specified period of time. This usually happens during loan processing
- Your last set of disclosures is the most important and includes another loan application, a closing disclosure (CD), and other specific “endorsements” that apply to certain loans (such as adjustable loans or programs supported by the government). You’ll get them (or even better) a little before closing day
Luckily, you don’t have to read all of these things, and just keep a few.
Check your new rate (January 16, 2022)
Waiting for your final loan documents
You applied for a mortgage and got conditional approval. But to get final approval and clear status to close, the lender needs a little more from you. You must meet your lender’s pre-closing conditions. Then the final loan documents can be issued and you can proceed to closing.
Related: Mortgage Commitment Letter (defining your financing)
In other words, you’re almost at the finish line. But first you need to perform a few more steps. Knowing what to expect can make this process easier. And it can help you meet your lender’s demands quickly and satisfactorily.
Satisfaction of pre-closing conditions
The hardest part of the mortgage process is over. You have completed your loan application. You have submitted important documents and financial records. And the lender has approved your loan but has a few final requests before the loan can be closed. This is common, especially for refinance loans.
Related: What does it mean when I’m “clear to close?” »
Some pre-closing conditions, for example, require you to:
- Provide additional financial documents or proof of income. If you are self-employed, you may need to provide profit and loss statements or a business license, for example.
- Prove your employment, work history and income
- Confirm your rental or ownership history
- Solve credit problems. The lender may ask you to explain or correct any errors, gaps, late payments, or red flags in your credit report or credit history
- Provide proof of mortgage and/or home insurance
- Explain a recent large purchase, withdrawal, deposit, or credit application
- Pay off other outstanding debts, especially if your debt-to-income ratio is too high
- Increase your down payment to make your monthly mortgage payment more manageable
- Provide proof of sale (a real estate contract) of your current home, if applicable
What to be aware of
To complete the process, “most lenders will require your case to be fully cleared to close. This means that there are no conditions left except for those that can be waived on the closing date,” says Craig Garcia, president of Capital Partners Mortgage.
It also means that “All necessary documents have been signed. The pre-financing borrowers’ stipulations have been received and reviewed. The assessment has been reviewed. And your rate has been locked,” Chris Lewis, director of sales and operations at Angel Oak Home Loans, says.
Related: How Long Does It Take To Close A Mortgage?
Your underwriter grants final approval and a “closing agreement” once all of these requests are met. Then your loan officer calls you to set your closing date.
Rate locks are tied to the property address. You can lock in a mortgage rate whenever you have an outstanding application to finance a specific property. You cannot lock in a rate when you are pre-approved and have not yet chosen a home to purchase.
The longer your lockout period, the more expensive it is. 30-day locks are standard for most lenders. If you are willing to close and lock for 15 or 7 days, you should get a discount on the loan fee or interest rate. if you lock for 45, 60 days or more, expect to pay for the privilege.
Locking protects you from a rate increase before closing. A “floating” interest rate means you take the risk that your final rate may be higher or lower at closing. If you choose to lock, make sure the lock will not expire before the scheduled closing date.
Related: When Should I Lock In My Mortgage Rate?
“Lenders normally have procedures in place not to draft final loan documents unless the lock covers the period needed to close and fund the loan,” Garcia says.
Many lenders can extend a lockdown for a day or two, but if you “blow your lockdown” and don’t close in time, you may have to pay more. It depends on the lender and whether interest rates have gone up, down or remain unchanged.
Preparation of final loan documents
The lender issues your final loan documents once you are cleared to close.
Related: Home Closing (What You Should Read & What You Can Skim)
“Most lenders require a minimum of 24 hours to generate, review, and send these documents to your closing agent or attorney. But if you’re in a hurry, ask for your file to be given priority,” adds Lewis.
Your right of withdrawal
If you are refinancing a principal residence, you have a mandatory withdrawal period before your loan becomes final. This only applies to refinances, and only for primary residences. You have three business days after signing to cancel the loan. You must do so in writing in order to invoke termination.
“This risks delaying the financing of the loan by a few days. But it’s considered a big protective advantage for you,” Garcia says. “Say you feel uncomfortable with the loan for any reason during those three days. Then you have the right to cancel the entire transaction without consequence.
Check your new rate (January 16, 2022)