Sample Closing Documents

At the transaction closing, consumers are presented with a significant number of closing documents which can be overwhelming. Entitle Direct has provided sample closing documents to help you get ahead, from the previously required HUD-1 and Good Faith Estimate forms to the newer replacements of these documents, the Loan Estimate and Closing Disclosure forms. These new forms were created by the Consumer Financial Protection Bureau (CFPB) and apply to all transactions on or after October 3, 2015. These forms are designed to help you better understand your mortgage/loan options, let you know what closing costs you can shop around for such as title insurance, avoid costly surprises at the closing, and ultimately save you money.

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Here are the most common and standardized documents that you may encounter when you close:

Loan Estimate gfe

The Loan Estimate is a new form developed by the Consumer Financial Protection Bureau (CFPB) that took effect October 3, 2015. This three-page form replaces the initial Truth in Lending (TIL) statement and the Good Faith Estimate (GFE) and must be provided to the consumer 3 business days after the submission of the loan application to your lender. The new form is essentially divided into 3 sections. The first section reviews the loan terms including loan amount interest rate and monthly principal and interest. The next section explains the projected payments of your loan. This section also explains your estimated taxes, insurance and assessment amounts. The third and final section explains your closing costs. It breaks the costing cost total charges down into origination charges, those charges you can and should shop around for to reduce your costs such as title insurance and those costs you cannot shop for. This section also shows other costs such as prepaid homeowners insurance and property tax.

All lenders are required to use the same standardized Loan Estimate form, making it easier for you to compare mortgage loans and choose the loan that is right for you.

Closing Disclosure - GFE

The Closing Disclosure form is a five-page document providing more details about your loan. Details such as loan terms, projected loan payments and closing costs including title insurance and fees and other costs. Many of the costs explained on the form are determined by the decisions you made when shopping for a mortgage. However, there is a very important section located in section C on page 2 of the form under “Loan Costs”. It includes pest inspection fee and survey fee and title insurance. The Closing Disclosure must be delivered to you by the lender at least 3 business days before you close on the mortgage loan. Why 3 days prior to your mortgage loan close? This give you time to compare your final costs and terms in the Closing Disclosure to those costs and terms in the Loan Estimate. This is known as the 3-Day Rule.

TILA-RESPA Integrated Disclosure Guide Book

The focus of the TILA-RESPA disclosure guide, published by the Consumer Financial Protection Bureau, is to provide the instructions for completing the Loan Estimate and Closing Disclosure. It also highlights common situations that may arise when completing the Loan Estimate and Closing Disclosure.

Loan Note

The Note, sometimes referred to as either the Deed of Trust Note or Promissory Note, is the borrower's promise to repay the loan. The note identifies the amount of the loan, the rate of interest, the term of the loan (i.e., 30 year, 15 year, etc.), the payment due dates, the grace period and late charges, prepayment penalty provisions, and other general default provisions.

Mortgage or Deed of Trust

This is your mortgage. The Deed of Trust is a lengthy document (approximately 7 to 12 pages) requiring the signature of all owners of the property for the purpose of granting a security interest in your home. After closing, the Deed of Trust is recorded with a legal description as a lien among the land records and as a matter of public record for the purpose of securing the borrower's promise to repay on the Deed of Trust Note/Promissory Note. In addition to identifying the property owners, the loan amount and the term of the loan, the Deed of Trust generally describes matters that would constitute a default on the loan thereby giving the lender cause to commence a foreclosure proceeding against the property.

HUD-1 (no longer in use for most transactions)

This document, no longer in use for most transactions, provides an itemized list of the charges to be paid at closing. Any item between 1100-1199 is an expense related to settlement services and title insurance. The totals at the bottom of the HUD-1 Statement determine the seller's net proceeds from the sale and the amount of the buyer's payment at closing.

GFE / Good Faith Estimate (no longer in use for most transactions)

A Good Faith Estimate form (GFE) has to be provided within three days of a consumer's application for a mortgage loan. The GFE details estimated fees and costs for your transaction.

Truth in Lending Disclosure

The Truth in Lending Disclosure Statement provides information about the costs of credit. As of October 15, 2015 for most mortgage loans a new form known as the Loan Estimate replaced the initial Truth-in-Lending disclosure form. Plus, the Closing Disclosure form replaces the final and outdated Truth-in-Lending disclosure form. One will receive a Truth-in-Lending disclosure twice: an initial disclosure when you apply for a mortgage loan and the final disclosure before the closing. Your Truth-in-Lending form includes information about the cost of your mortgage loan including your annual percentage rate.

Right to Cancel/Right of Rescission (Not Relevant to Purchase or Investment Property Transactions)

A Right to Cancel form, also known as Right of Rescission must be provided for any loan secured by a consumer's principal residence that gives the borrower three business days to cancel the loan transaction for any reason without cost.