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October 29, 2015

Paperwork: What to Expect

Homeownership

If you’re buying a home, it’s likely you’ve heard about “the paperwork.”  Indeed, there’s a lot of paperwork involved in the homebuying process, but this is probably the largest purchase you’ll ever make and the paperwork is put in place to protect you, your home and all parties involved in the transaction.

The best way to get comfortable with the documents and understand what you’re signing is to get familiar with the forms and understand what you can expect – before and at closing. 

Forms You’ll See Prior to Closing

  • Buyer Representative Agreement:  When you engage a real estate agent to help you buy a home, they may ask you to sign a Buyer Representation Agreement.  This is a legal document that formalizes your working relationship with your agent.
  • Uniform Residential Loan Application: This is your mortgage loan application that captures information about you, your finances, and details of your potential mortgage. You’ll be required to provide information about your monthly income, combined household expenses, assets and liabilities, and personal information such as your social security number and marital status. This information will help your lender assess your ability to pay your mortgage. 
  • Purchase Agreement: Once your offer to purchase a home is accepted by the seller, a purchase agreement is drawn up. This agreement typically includes all details of the purchase, including the names of the buyers and sellers, total purchase price, commission payable to the real estate agent, and requested closing date. The purchase agreement is used to secure financing from the lender, and is submitted as part of the closing paperwork.
  • Loan Estimate:  Within three business days after completing your loan application, your lender will give you a Loan Estimate that should reflect the particular loan you discussed – including all terms and associated costs due at closing.  Consider exploring your loan options from several lenders and choose the loan that is best for you.

In October 2015, the Know Before You Owe mortgage rule went into effect, replacing four disclosure forms with two new ones to provide greater transparency and make the mortgage process easier.   

The Most Important Forms You’ll Sign at Closing

  • Closing Disclosure: This form provides all of the actual fees, costs and credits associated with closing your loan.  Your lender is required to provide you with the Closing Disclosure 3 business days before your scheduled closing to review and ensure that the loan terms and costs align closely with those provided in your Loan Estimate. 
  • The Promissory Note: This is the legal document you sign agreeing to repay the loan according to the terms to which you agreed. It outlines the details of the loan, the dates when payments are to be made and where payments are to be sent.  It also explains what can happen if you fail to make a payment on time.
  • Deed of Trust: By signing this document, you are giving the lender the right to take back the property by foreclosure should you fail to repay your loan as agreed. This document also explains your rights and responsibilities as a borrower.
  • Deed:  The seller will sign the deed to transfer ownership over to you, and it will have the names of all the buyers on it. Your title will be held with a third-party trustee until you have paid for the house in full. You will receive a copy of the deed at closing.
  • Affidavits and Declarations:  These are statements declaring all the information you provide is true, including that the property will be your primary residence and all repairs needed on the property were made prior to closing.

Remember to lean on your team with any and all questions – you have the right to understand everything you are signing!

Follow this series to learn what to expect about other important topics and visit My Home by Freddie MacSM where we discuss it all.

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