July 10, 2018
Before your FHA home loan closes and you sign on the dotted line, there are some things you should know. Home closing paperwork spells out the agreements you have made on the mortgage and these documents are legally binding.
It’s a very good idea to be familiar with them and know their contents before you sign.
What kind of paperwork will you get with a new purchase mortgage loan at or before your closing date?
One very important document is known as the Closing Disclosure and it should be compared to another document you received earlier in the FHA loan process known as the Loan Estimate.
The estimate is not an indication that your FHA loan has been turned down or approved, it is simply a way to add up estimated costs including taxes, origination fees, estimated monthly payment, etc.
This document should not be taken as a guarantee that the listed costs will come in precisely as listed in the estimate.
The Loan Estimate should be in your hands within three days of a loan application according to the Consumer Financial Protection Bureau.
FHA home loans for new purchases (whether existing construction or for new construction loans) will feature a Closing Disclosure which will detail your loan terms, fees and expenses (including origination fees), plus your estimated monthly mortgage payments.
This disclosure is required at least three business days prior to the day you close the loan. Compare the terms of your loan with your loan estimate and use the three days you have wisely if you have any questions about the final costs of the loan.
FHA borrowers applying for reverse mortgages won’t get the Loan Estimate, but instead will get what is known as a Good Faith Estimate along with a Truth-In-Lending statement.
Three days before closing time you will not receive a Closing Disclosure, but rather a HUD-1 Settlement Statement and a final Truth-In-Lending disclosure.
If you find errors, misspellings, or other problems with any loan paperwork before closing, ask your loan officer to clarify or correct these issues. Do not sign paperwork with errors, missing or blank pages, or content you don’t fully understand.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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