Documents related to closing costs

The closing revolves around four documents: the settlement statement, the truth-in-lending form, the mortgage promissory note, and the mortgage.These documents describe your loan terms, responsibilities, and the closing costs you are expected to pay at settlement. If you're familiar with these documents, you can quickly complete the closing or catch potential errors.

The HUD-1 settlement statement and the truth-in-lending form include important information about your closing costs:

• Settlement statement. The settlement statement is usually delivered or mailed to you at or before the settlement. (By law, you have the right to inspect the HUD-1 settlement state-ment one business day before the closing.) The HUD-1 settlement statement itemizes each service provided to you and the fees charged to you. This form is completed by the closing agent. This is the same person who will oversee the closing, so make sure you have the name, address, and telephone number of this individual. In cases where there is no settlement meeting, the escrow agent will mail you the HUD-1 settlement statement after the closing. You can locate a copy of the HUD-1 settlement statement form at the HUD Web site (www.hud.gov/fha/sfh/res/stcosts.pdf).
• Truth-in-lending form. This form details all the major financial terms of the home loan. There are two types of disclosures made in this form:the numerical disclosure, so consumers can compare the cost of one loan to another, and the disclosure of the terms of the mortgage agreement. For example, numerical disclosures include the annual percentage rate, finance charges, amount financed, total payments, amount of payments, number of payments, security interest, assumption policy, variable rate, filing fees, late charges, payment due date, pre-payment policy, hazard insurance, and mortgage insurance.
• The mortgage promissory note. This legal doc ument obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time. This is your I.O.U. to the lender and a promise to meet the requirements of your home loan. Depending upon when you close (settle), this document will out-line the prepaid interest you will have to pay at the closing.
• The mortgage. This legal document pledges a property to the lender as security for payment of a debt, giving the lender a legal claim on your property if you don't fulfill the terms of the promissory note. In some states a "deed of trust" is used instead of a mortgage. In other words, you receive title to the property but convey it to a neutral third party until the mortgage promissory note is paid in full. The mortgage is not related to certain closing costs, but central to the closing process. Without the mortgage, you can't close the deal, unless you are paying all cash for the property.