The importance of reading your loan documents prior to closing

What to look for in your closing documents

By law a homeowner is suppose to receive all closing documents three days prior to any real estate closing. Allowing that homeowner enough time to intelligently decide if the terms and condition contained within the loan is what was originally sold to them and make sure all terms and agreements meet the approval of the homeowner. This was never the case, if you have ever purchased or refinanced a home, you will know that the first time you saw any closing documents was either at or just minutes prior to the closing taking place.

For the vast majority of homeowners looking at a complete packet of loans documents is like looking at an ancient sea scroll in hieroglyphics. The reality is that the wording is so complex and one sided that most homeowners don’t even bother reading past the first page and instead initial and sign when and where the closing agent tells them to.

Everyone deserves to make a buck and it is always easier to be a Monday morning quarterback back and say “I saw this coming”, but the reality is that our lending model has been based on commissions and closing. All parties involved do not get paid until a loan has been closed and funded and then in some cases sold on the secondary market. It starts with the mortgage broker or loan officer, appraiser, realtor, attorney and last but not least the title company. The problem with this model which is now very clear after all the destruction has been done is that when your paycheck is linked to the close of the deal, it doesn’t matter how ethical or good hearted you are, we all need to eat. The sad part is that the vast majority of all real estate and finance professionals did do the right things based on the guidelines they were given, but when push comes to shove the almighty dollar will always end up winning out in the long run.

Before going to your next real estate closing make sure you request to see all your closing documents at least three days prior to closing and that you compare what you signed on your original loan documents and application to the ones that have and will be submitted to the lender in the final loan packet. If any of the numbers do not match up immediately walk away from the deal. This means that at some point the numbers have been tampered with and the loan is a fraudulent loan. You also have three days after a refinance to cancel the loan if you are not happy with it. Becoming an educated consumer is always your best defense.

Filed Under: Predatory Lending