Mortgage Advice
Mortgages

Understanding Mortgages: Mortgage Paperwork

In the midst of one of the most uncertain real estate markets in history, it’s more important than ever to be informed. In a continuing series, we take a look at some of the most pressing questions about mortgages, refinancing, home equity, and other real estate options available to you.

(8/9/2012) When applying for and obtaining a mortgage, there’s a enormity of paperwork involved. It falls into two camps - paperwork you provide for the qualification of the mortgage, and paperwork you receive and sign.

During the pre-approval and underwriting processes of obtaining a loan, a mortgage broker or lender will request a number of documents from you to determine your assets, income, credit quality and other financial information. These can include federal tax returns, W-2 forms, recent paycheck stubs, proof of any other incomes (social security, retirement benefits, child support, etc), statements of other loans and credit, investment records, and more.

During the application process, the mortgage broker or lender will provide to you a document called a Good Faith Estimate (GFE). This will provide a detailed list of all the fees associated with the loan, as well as all the closing costs that must be paid at the time of closing. The document is an estimate, and covers fees that may vary over time. Careful consideration of this document ensures the loan is a good investment.

In addition to the GFE, your broker or lender will provide a Truth in Lending Act statement (TILA). This document discloses all the terms and conditions of the mortgage, including the interest rate, loan amount, total payments, and all fees and charges.

Finally, you will receive a Form 1003, which is the actual mortgage application form. The form covers all personal information for the borrower, as well as income, assets, credit and debt. Accompanying this form will be a number of disclosure statements, such as the notification that your lender may elect to sell the loan to another in the future, as well as the interest rate lock-in agreement, specifying a specific interest rate for a specific time.

When the loan has been approved and it’s time for closing, a number of other documents will come into play.

A Mortgage Note is a written promise to repay the amount of the loan, plus interest, at a certain rate for a specified amount of time. The HUD-1 Settlement statement is a form showing the borrower the total amount of money that must be paid at closing (and this can be requested one day before the closing). The Initial Escrow statement lists estimated property taxes, homeowners insurance premiums, and other expenses to be paid from escrow for the first year of the loan. Finally, the Deed transfers the title of the property to the buyer, and includes a detailed description of the property.

No matter what stage of the process you’re in, and no matter what paperwork you are provided, ensure you fully understand what the form is for, what it says, and what it means for the loan before signing. Only then can you enter into a loan that’s right for you.