Managing deluge of mortgage documents
The best way for mortgage borrowers to prepare for the deluge of documents they will face at closing is to sort them into categories that require different treatment.
Educational documents, such as these, contain information borrowers should know well in advance of closing.
The borrowers' closing affidavit, which requires acknowledgment in writing of critical details on which the lender depended in approving and pricing the loan, including intentions regarding occupancy of the property, financial and employment information included in the application, and condition of the property. Borrowers must declare that they have not taken on any new debt, that their employment status has not changed, and that all issues connected to the purchase are resolved.
Notice of no oral agreements, which requires the borrower to acknowledge that the deal is wholly governed by the written agreements.
Amortization schedule, which shows the monthly payment and loan balance over the life of the loan, assuming no extra or missed payments.
Future-use documents, which instruct borrowers on their responsibilities in the first year.
First-payment letter, stating the amount and composition of the initial monthly payment, and where, when, and how to send it. You may receive another instruction replacing this one if your loan is sold before the first payment.
Escrow account statement, which describes borrowers' responsibilities in connection with the escrow account for taxes and insurance. An initial disclosure statement shows expected first-year inflows to and outflows from the account.
Future flood-insurance authorization, obliging you to purchase coverage if the government places the property in a flood plain. You must comply or the lender will buy coverage and bill you for it.
Jack Guttentag is professor emeritus of finance at the Wharton School. Reach him at http://www.mtgprofessor.com.