Mortgage & Equity
13 Closing Documents to Keep
This section will discuss:
The documents you should retain for your records.
Out of that vast sea of papers that swept over you at closing, what should you bother to keep?
The answer is simple: Everything you signed your name to. That includes
- Settlement statement - This is the form that itemized everything covered in closing; it showed which costs were paid by seller and buyer.
- Truth in Lending statement - This document is required by federal law, the idea being that borrowers should know the details about the loans they make. On this document, you'll see an annual percentage rate (APR). This will be higher than the rate stated on your mortgage because it factors in the points and other fees you pay. The Truth in Lending statement also spells out the total amount you're financing, the total amount of interest you'll pay over the life of the loan, what your monthly payments will be and so on.
- The note - This represents your promise to pay the lender according to the agreed-upon terms. It details all the terms of the loan, including any penalties the lender will impose if you default. It also explains your right to prepay the loan (that is, pay off your mortgage before your loan period is up) and specifies if there are any prepayment penalties.
- The mortgage (or "deed of trust," in some states) - This is the legal document that secures the note and gives the lender the right to take your house if you default. It spells out all your responsibilities as a borrower.
- The deed - One of the most important papers in the bunch, this is the document that transfers the ownership of the property from the seller to you.
- Affidavits - On closing day, you will sign many affidavits, such as stating that you intend to occupy the property and so on.
- Riders - These detail any additional requirements that apply -- for example, an ARM rider or a condo or PUD rider for condominiums or planned unit developments.
Besides closing papers, you should, of course, keep all insurance records on your home. You should also keep records of the costs of home improvements you make over the years. You will need these records for tax purposes because although home improvement costs are not deductible on your income tax, they do increase your home's "basis." This determines the amount of your gain for tax purposes when you sell the house.
