An attorney can examine the settlement statement for accuracy, and to make sure you are not paying for items that the other party by right should be responsible for. There are also many documents to sign, some of which are described here to hopefully make it a little clearer for those of you contemplating a real estate purchase or refinance.
This is a list and short description of most documents a buyer, seller, or mortgage refinancer may see in his or her closing paperwork. The list is not meant to be exhaustive, nor does it describe any document completely, but is merely a hopefully helpful description of some of the common documents you will encounter, to make the closing process seem less daunting and confusing to you. This is not meant as legal advice, but you may feel free to consult me if you require legal advice and counsel.
Settlement Statement-
Describes what funds are paid out of seller’s and buyers’ monies, and the amounts, including mortgage closing expenses, recording fees, title insurance fees, town taxes and utilities, etc. that are to be paid out of closing funds.
Limited Correction Agreement- Borrower signs this agreement giving the Bank the right to correct any clerical errors found in executing the loan documents, but expressly states that the bank may not use this right to increase the interest rate, amount, monthly principal and interest payments, or length of the loan.
Note- The promise to pay the loan, signed by the buyer or borrower.
Mortgage- Security for the loan, which is recorded at the registry of deeds and becomes a lien on the property.
Initial Escrow Amount Disclosure Statement- Usually 1 sheet, that is an estimate of the activity in the escrow account for the coming year based on payments anticipated to be made from the escrow account.
Payment Schedule- A breakdown of the principal and interest, and the taxes, that will be paid each month, the total monthly payment, and on what day of the month the payments are due, and where to send the payments (the bank or mortgage company address), signed by the borrower.
Mortgagee Notice to Condominium Association-Informs the Condo Association that Mortgagee (the bank or mortgage company) will record a mortgage lien against the condominium unit in question.
Request for Taxpayer Identification Number and Certification- A person who is required to file an information return with the IRS must get your correct taxpayer identification number (TIN) to report, for example, income paid to you.
Owner’s Notification Regarding Tax Bills- Buyer or (in a refinance) owner signs this stating he or she will forward tax bills to mortgage company as soon as they get them, to keep any interest or penalties from accruing.
Owner’s Tax Bill Authorization- Notice (signed by owner) that is sent to city hall giving them authority to mail tax bills directly to the mortgagee (bank) so that they can use the figures in paying the taxes via escrow holdings.
Errors and Omissions/Compliance Agreement- Borrower signs this as an agreement to cooperate in case of clerical errors in creating the loan documents.
Truth in Lending Disclosure Application- Under Federal Law, the Lender is required to inform the borrower concerning the terms and cost to borrower of the credit transaction, including the annual percentage rate (APR), Finance Charge, amount financed, and total of payments, schedule of payments, whether the loan is assumable (this is very rare), late payment charges, and prepayment penalties, and if the loan is an adjustable rate loan, the details of the adjustment.
Urea Formaldehyde Foam Insulation (UFFI) Certificate- Buyers and Sellers sign this certifying whether or not there is urea formaldehyde insulation in the home being financed.
Certification and Indemnification Agreement RE: Installation of Approved Smoke Detectors- Buyers and Sellers agree that there are working smoke detectors in compliance with MGL Chapter 148, Section 26E and 26F.
Lead Paint Disclosure- Buyers and sellers agree to hold Mortgagee (bank) harmless for any injuries or cost/damages caused by lead paint on the property, even if buyer is required by law to remove the paint.
Unit Owner’s Affidavit- Owner certifies that no tenants have a right to reside in the unit at the time of sale, and there are no mechanic’s liens (money owed to companies or workers that may have performed work in the unit), no violations regarding use of the unit, and no unpaid common expenses or rights of first refusal (some condominiums require the owner of a unit to allow the association to decide whether to buy the unit before the owner can sell the unit to an "outsider") that have not been complied with, or work done in the unit without proper permits.
Owners Special Title and Survey Report for Qualifying- Owner of a unit certifies to the title company that there are no easements for others to use the property, or boundary line disputes (such as fences or driveways), etc.
