Signing Loan Documents
What should you expect when signing loan documents? A huge pile of papers for sure. The question is, do you just sign, sign, and sign away, or should you suck it up and read the whole thing?
Your best bet is aways to know what you are signing - it's worth your time to make sure every document corresponds to your understanding of your mortgage. You may not have to read the standard paragraphs, but be sure anything specific to your loan is correct. Here are the things you will be signing:
The note. This is the promise to repay the loan, and will include the amount you are borrowing, the interest rate, how long you have to pay it off, information about early pay-off, and penalties for late or missed payments.
The mortgage or deed of trust is what ties the property to the loan. You are not just borrowing money, but borrowing money and using the property as security for the loan. This is the piece of paper which states jus that.
Loan dislosure statements. These are required by the state. They state that you have read the disclosures from the lender and agree to the terms.
Copies of your tax returns. Usually included in the packet are your tax returns to verify your income; you may need to sign and certify they are correct
Your loan application. You completed this earlier on in the process and it now becomes a part of the closing package.
Lender permission. You may need to sign a document giving the lender permission to get your tax returns directly from the IRS.
Before You Sign
Before you sign any of these documents, please follow these consumer guidelines, which are extracted directly from the State of California web site:
- Check the contract to confirm that the terms you agreed upon are clearly written in the loan documents
- Read the entire loan contract to make sure you fully understand your obligations and all provisions of the contract before signing
- Never sign blank forms or sign one with information that is incorrect
- Talk with a knowledgeable and trusted advisor or professional of your choice prior to signing a loan agreement.
- Never allow yourself to be pressured to sign a contract that you are not comfortable with or do not understand.
- Never rely on verbal assurances - if it's not in writing, it's not going to happen
Finally, find out if you have cancellation rights. Some loans, but not all, give you the right to cancel the loan application within three days after signing. Carefully review your loan application to determine whether or not you have cancellation rights.