Are you confused by the terminology used regarding your real estate closing? Here’s a checklist of some of the paperwork that you think you know about, but perhaps don’t.
• Deed: transfers ownership of real estate, contains the names of the buyer and seller and a legal description of the property. The most common, as well as the most advantageous, type of deed is the “warranty deed” in which the seller guarantees that he has the right to sell the property and that the property is free of encumbrances.
• Mortgage: creates a lien upon real estate as security for the payment of a debt. A separate promissory note is also signed by the borrowers which is their personal guarantee to repay the loan.
• Certificate of occupancy: a statement by a municipal building inspector that the building complies with all building codes and zoning regulations.
• Closing statement: contains adjustments for such items as the purchase price, down payment, assumed and seller-held mortgages, taxes, heating oil, rents, deposits and flat water charges.
• Judgment affidavit: states that the buyer or seller has no judgments, warrants, bankruptcies, or incompetency proceedings against him or her.
• Amortization schedule: shows the monthly mortgage interest, principal and balance.
• Assumption statement and escrow assignments: used if the mortgage is being assumed. The statement sets forth the balance of the mortgage principal and escrow account. The assignment transfers the insurance and tax escrow from the seller to the buyer.
• HUD Form 1: The Disclosure Settlement Statement, required by Real Estate Settlement and Procedures Act, contains all of the actual settlement costs and amounts.
• Insurance: binder must name the lender as a loss payee.
• Mortgage discharge/satisfaction: removes the lien of the seller’s mortgage.
• Search: or abstract of title, is a historical digest of every document that has been recorded concerning a particular piece of property, including deeds, easements, mortgages, rights-of-way, oil and gas leases, bankruptcies, estate proceedings, tax liens and judgments. Excerpts of each legal document are arranged chronologically with the names of the parties involved, the type of document and the date the document was signed and recorded.
• Assignment of Leases: goes from from the seller to the buyer
• Survey: a blueprint drawn by a licensed surveyor showing the measurements, boundaries and area of the property. It also shows fences, driveways, waterways and all buildings located on the property.
• Title insurance: A mortgagee policy protects the bank. A fee policy protects the owner.
• Federal and State Estate Tax Affidavit: necessary if a prior owner died.
• Mortgage commitment: written notice from a bank informing a loan applicant that it will grant the mortgage loan under certain terms and conditions.
• Transfer tax return/credit line mortgage certificate: filed with deeds and easements, it is used to compute the state and local transfer taxes.
• Early occupancy agreement: drafted if the purchaser is moving in before the closing. It usually requires the purchaser to pay rent, utilities and maintenance costs.