Understanding the Closing Documents

There are a number of documents that have to be reviewed and signed at the closing. Each serves a different purpose, but all - or most - are required to complete the purchase.


The Note
This is your contract with the lender whereby you agree to repay the loan with interest as specified.

The Mortgage
The mortgage provides the lender with a claim against the home you are purchasing as security for the note.

Truth in Lending Form
This is a form that confirms that your lender has disclosed all loan costs to you in accordance with legal requirements.

RESPA
This stands for, "Real Estate Settlement Procedures Act." It is essentially a declaration that you understand the closing procedure.

Closing Statement (HUD-1)
This is an accounting of all amounts that are due to and from the buyer and seller in the transaction. The HUD-1 lists all of the uses of the sale proceeds, including the payoff of the seller's mortgage, apportionments for property taxes, real estate commissions, etc. The statement is used to determine a final amount of cash that is due to or from the buyer and seller.