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Mortgage Loan Documents

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

The table below outlines the key loan documents required to close your mortgage.  These documents are typically prepared by the settlement agent (also called a closing agent) and provided to the borrower to review and sign at least three days prior to closing.  The loan documents outline the key terms of your mortgage and property purchase.

We recommend reviewing all mortgage loan documents carefully before signing them and focus on the Closing Disclosure because it outlines your final loan terms.  You should use the Closing Disclosure to compare the actual terms of the mortgage to the terms proposed by the lender at the start of the process.  If there are significant differences between the final mortgage terms as outlined in the Closing Disclosure and the terms the lender committed to at the beginning of the process, such as an increase in interest rate or closing costs, then ask the lender for an explanation.  You should cancel the mortgage if the discrepancies cannot be resolved. 

You can cancel your mortgage at any time before you sign loan documents but not after you have signed documents so make sure you are completely comfortable with the  the terms of your mortgage and property purchase before you sign anything. If you cancel, or rescind, your loan, you may be out certain upfront, non-refundable costs and fees. But canceling a bad mortgage and finding a loan with better terms can save you thousands of dollars in closing costs or interest expense.

Please note that for a home purchase mortgage, borrowers cannot cancel the mortgage after they have signed loan documents.  For a refinance, you can cancel your mortgage up to three business days after signing loan documents but we recommend that you not sign loan documents if you find any major issues 

As illustrated by the table below, there are a lot of mortgage loan documents that comprise hundreds of pages, so the volume of paperwork can be overwhelming.  Despite the number and length of documents, borrowers should take the time to review and understand each one.

Your Mortgage Note, for example, outlines your loan terms including your interest rate, loan length and key loan features including a potential prepayment penalty. If your loan has a unique feature such as an adjustable or variable rate or interest payment, then your note has an additional rider or addendum that explains the feature.

The Grant Deed indicates your ownership of the property and is filed with your county recorder office so it is a matter of public record. The Deed of Trust (or mortgage depending on what state you are in) is also submitted to your county recorder office and shows that there is a mortgage lien on the property. The First Payment Letter lets you know when your first loan payment is due, as well as the amount, so that you do not incur a late fee.

In short, these documents cover every aspect of the mortgage and home purchase transaction so borrowers should spend time reviewing them and making sure they are accurate. This is especially important because most of these are legal documents that are in the public domain.

Key mortgage costs items

1
Closing Disclosure (CD)
Closing Disclosure (CD)
  • Document that outlines the final, actual terms of the mortgage including interest rate, closing costs and mortgage features
  • Although the lender is legally responsible for the content of the Closing Disclosure (CD), the closing agent typically provides the CD to the borrower
  • The CD must be provided to the borrower at least three days prior to the mortgage closing
2
Grant Deed
Grant Deed
  • The legal document recorded by the county government that conveys property ownership to the buyer
3
Deed of Trust
Deed of Trust

(or Mortgage if you are in the Southern U.S.)
  • The legal document provided by the lender and recorded by the county government that indicates that there is a promissory note on the property
4
Mortgage Note
Mortgage Note
  • Document that outlines the key terms of the mortgage and indicates the borrower's promise to repay the debt
5
Reconveyance Deed
Reconveyance Deed
  • Document provided by the seller's lender indicating that the seller is released from his or her mortgage debt and that lender no longer holds a lien against the property (because the seller has paid off his or her mortgage)
6
First Payment Letter
First Payment Letter
  • The first payment letter notes your monthly payment amount, when the payment is due and where to send the payment
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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.

Sources

"Understanding the Documents Involved."  My Home by Freddie Mac.  Freddie Mac, 2017.  Web.

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