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Closing documents: A guide for homebuyers

Closing documents
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From start to finish, the homebuying and selling process involves complex paperwork, and the closing is no exception. As you near closing day, be prepared for the documents you’ll see with this checklist.

List of closing documents

Closing disclosure

The closing disclosure contains all of the details of your mortgage, including an itemized list of closing costs. It’s similar to the loan estimate — which you might also receive a copy of — that outlined the interest rate, monthly payment and other information about the loan. You’ll receive the disclosure at least three days before the closing so you’ll have time to carefully review it and ask your lender or attorney any clarifying questions.

Proof of homeowner’s insurance

In advance of closing, you’ll need to provide your mortgage lender with proof of homeowner’s insurance for the property. You can do this as soon as you’re under contract on a home. Most lenders mandate that the insurance documentation include a mortgagee clause, which indicates that the lender has an interest in the property. Lenders also often require a receipt showing the premiums have been paid up to a certain point, typically a few months to a year out.

Loan application

If you’re the buyer, you’ll also receive a copy of your initial mortgage application. Although nothing should’ve changed materially from when the application was first submitted, both you and the seller (either the seller’s attorney or real estate agent) should review it.

“We want to prove to the seller that the lender can righteously award a loan on the basis of the borrower’s income, credit and savings,” says Jeff Lazerson, president of Mortgage Grader, a mortgage broker based in Laguna Niguel, California. “It serves no good purpose for anyone if the property is off the market and buyers can’t close.”

Mortgage or deed of trust

The mortgage or deed of trust is the agreement between you and your mortgage lender to put the home up as collateral for the loan.

“In layman’s terms, it gives the lender the right to foreclose on the property if the borrower defaults,” says Debra Johnson-King, community development manager for The Mortgage Firm, based in Orlando, Florida.

Many states allow or use a deed of trust, which differs from a mortgage in that a trustee — usually a title company or attorney — is authorized to take action if the borrower stays paying. This arrangement differs from a mortgage agreement, which only involves the borrower and the lender, not a third-party trustee.

Note

The note documents the promise you made to your mortgage lender to pay back the loan. It includes details about the home as well as the terms of the loan, including repayment.

Deed

The deed conveys ownership rights from the seller to the buyer. Only the seller (or sellers) sign the deed. The transfer is then recorded with the county.

Title insurance policy

The title insurance documents pertain to the lender’s policy, which you’ll pay for with your closing costs, but only protects the lender. If you chose to purchase a separate owner’s policy, you’d also see documents about this, and be protected in case of any claims against ownership of the property.

“I always recommend title insurance to my clients — just get it,” says Johnson-King. “You can never have too much insurance, that’s my policy. If you have a good real estate agent, they can negotiate for it to be paid by the seller at the time of closing.”

If you get an owner’s policy, be sure you understand any exceptions to the coverage (circumstances or items the policy won’t cover).

Affidavit of title

The seller also provides an affidavit of title, a legal document that establishes they hold title to the property and includes information about any liens or other title issues.

There might be other affidavits for the buyer or seller to sign, as well. Essentially, these are sworn statements regarding various facts of the transaction.

Initial escrow statement

Your escrow account already contains the earnest money or initial deposit you made on the home, and you’ll continue to fund it for other escrow items like homeowners insurance and property tax payments. For the closing, you’ll receive an initial escrow statement describing how much your lender or servicer will pay out of this account when these items come due during the first year of your mortgage.

Transfer tax declaration

If you live in one of the states with a real estate transfer tax, you and the seller will also receive documentation detailing the tax owed.

Certificate of occupancy

If you’re buying a newly-built home, you’ll need to have a certificate of occupancy that proves the property is fit to live in and for the purpose that it was built. The certificate includes the address and description of the property and verifies that it’s up to code. You should’ve received a certificate from the builder or developer, but if not, you can obtain it from your local building or zoning authority.

If you’re buying a preowned home, you can still ask the seller for a certificate (and if the home pre-dates certificates of occupancy, your local authority might have an equivalent document). This’ll help confirm whether the seller made improvements with proper permits — if not, it’ll be your responsibility to legalize the home for occupancy.

Closing documents checklist
Closing disclosure
Proof of homeowners’ insurance
Loan application
Mortgage or deed of trust
Note
Deed
Title insurance policy
Affidavit of title
Initial escrow statement
Transfer tax declaration
Certificate of occupancy

Bottom line

Purchasing a home involves lots of paperwork. As the buyer, you’ll need to obtain and document homeowners and title insurance, and you’ll receive many documents before and at the closing, like the mortgage or deed of trust and note. Pay close attention to all of these to ensure the information is accurate before signing.

Written by
Ruben Caginalp
Associate writer
Ruben Çağınalp is an associate writer for Bankrate, focusing on mortgage topics.
Edited by
Mortgage editor
Reviewed by
President, Real Estate Solutions