4 Mortgage Documents You Need to Know
When you’re buying a Saratoga home, you will go through a lot of paperwork, especially when it comes to your mortgage. Much of it needs to be turned in by a certain deadline. You should still know what you’re signing. Over the years, the laws have changed to protect buyers from bad deals. The Truth in Lending Act (TILA) protects the buyer from any closing cost abuses. The Real Estate Settlement Procedures Act (RESPA) stops a housing service provider (realtors, title companies and lenders) from using referral fees for the business they bring each other.
Here is your essential guide to the four mortgage documents you need to know in Saratoga.
The Loan Estimate
Within three days of applying for a loan from a lender, you will receive what is known as the loan estimate. This document tells you everything you need to know about your mortgage. It outlines the whole payment plan so you won’t have any questions about what is due and when it is due.
The document breaks down your payments so you can better understand the projected payments, line item closing costs and any other loan term details you will need to know.
The Closing Disclosure
This document is time sensitive. It must be given to you three business days in advance of your closing on the mortgage. This new document replaced what was called the final settlement statement. While very similar to the loan estimate, this document also breaks down all the costs paid by you, the seller and any third parties.
This is a great way to look back at what was spent. You will be able to ensure everything is accurate. You will also be able to ask questions and ensure that you know exactly what you’re paying versus everyone else.
Assuming everything looks good after the three-day wait period, then you can proceed with the buy and begin signing the loan documents, which we’ll now discuss.
Promissory Note
Now that the loan estimate and closing disclosure have been signed and accepted, you will receive the promissory note, which is similar to the loan estimate. This note, however, is more concrete and outlines the details of the loan, such as:
- The loan’s terms (30-fixed, for example)
- Payment rates, intervals and changes that will occur overtime
- Determines a prepay penalty if the loan is paid early
If you cannot pay to the note’s terms, the lender will have the power to take your home. More information on this is provided in the security instrument.
Security Instrument
The deed of trust or the mortgage promise your property as security in the promissory note. There are three different types of occupancy provisions to abide by depending on the type of loan you have:
- Owner-occupied: the buyer must move onto the property within the first 60 days of the closing. He or she must live there for a full year before being allowed to rent out the property or use it as the owner’s second home.
- Second home: The property cannot be rented, but it can be used as a second home.
- Non-owner occupied: This loan comes with a higher rate, which allows you to change the owner-occupied home to a second home whenever you want to.
All of these documents can be a little confusing. If you have any questions at any point throughout the process, be sure to speak up. This is too big of a decision to wait and try to figure out the answer down the road.