This morning I read a post (Reading Redux) at Credit Slips regarding a familiar lament about not reading all documents at closing. It’s a subject I’ve visited before.

Lenders are notorious for getting document to escrow late or, at the very least, at the very last possible moment. Obviously it helps to select a trustworthy lender (and a service oriented escrow officer) who you’ve forewarned you’ll need three days to review all documents prior to closing. This combined with a provision in your purchase and sale agreement (to the effect of: buyer shall have 3 days to review closing documents prior to closing… in the event documents are not avail… closing shall be extended…. but in no event later…) should provide you ample time for review.

Even though I always recommend it, it’s been my experience few buyers read all the paperwork at closing (I attend client closings). Unless prepped, they don’t know the important things to look for hidden in the blizzard of paperwork. And why should they? They don’t deal with it every day.

Get an agent who knows what they’re doing and take the time to do it right. There’s always time…. there are no emergencies in real estate.

One would have to be rather cavalier (or naive or dumb) not to read all loan documents before signing.

Sympathy for those who don’t? Please… If you’re going to give someone a signed blank check, don’t complain later when they cash it.

Sure there’s a lot of paper involved. But most of it is boiler plate. If you need more than an hour or so (typical time) to thoroughly understand what you’re signing, take the documents home to study and bring them back another day. (It’s unreasonable to ask the signer to spend 3-4 hours to sign.)

Or ask your agent to attend signing with you. If your agent won’t attend closing, or doesn’t know what’s important to check, you can find a buyer’s closing table checklist here to use as a guide to get you started.

One of the documents you’ll normally sign is a statement saying you have had the opportunity to read all documents and that you do understand them. If escrow urges you to sign before knowing/reading what you’re signing, I suggest changing escrow companies.

Buyers should bring the following to escrow (the closing agent) when signing closing documents:

1. Good Faith Estimate – This should have been provided by your lender.
2. Truth-in-Lending (and here) form – Provided by your lender.
3. Rate Lock Confirmation – You should have received a written rate lock confirmation from you lender at the time you locked.
4. Lender Guarantee Letter if any – Your lender may have provided you with a letter guaranteeing their fees will not vary from their estimates by a certain percentage.
5. Your lender’s cell phone number – In case you have questions or need a document redrafted.
6. Drivers License (or passport) – The notary will need it.
7. Cashiers Check – The dollar amount should have been provided by escrow after preparing the HUD-1 settlement statement. You can also wire funds. Don’t bring a personal check.
8. A pocket calculator – Bring one you already know how to use.
9. Driving directions to escrow (google maps or mapquest)

Signing closing documents, especially for the buyer (with a loan), can be intimidating. There’s a lot of paperwork. Most of it is boilerplate. If there is anything you don’t understand, don’t sign until you thoroughly understand it. The pressure at the closing table can be enormous, but don’t be intimidated. Again, don’t sign until you really understand what you’re signing.

OK, here’s the key elements you’ll want to review. I’m not providing legal advice -you’ll want to check with your own attorney:

1. Your real estate agent has (should have?) reviewed your settlement statement (HUD-1) at this point, but you’ll want to verify the numbers.
   1. Check the price is correct.
   2. You’ll check the itemized settlement charges later. They will be detailed on the second page.
   3. Check the proration of taxes is correct. Taxes are paid twice a year (Washington) and are due the end of April and the end of October. As the buyer you will pay taxes from the day after closing until the end of the half year (June 30 or Dec 31). If the seller has already paid the half year taxes, you will owe the seller an amount prorated on a daily basis from the day after closing to the end of the half year. If the seller has not paid the taxes for the half year, you will be paying the taxes for the period and the seller will owe you for the period from the start of the half year period until the day of closing. The escrow company may have used 360 days or 365 days as one year.
   4. Check you have been credited the proper amount of your earnest money.
   5. Check the loan amount is correct.
   6. If the seller is paying any of your closing costs and/or prepaids, check they are correct.
   7. Check the items payable in connection with your loan (section numbered 800s). They should be pretty close the what’s listed on your good faith estimate. If there’s a wide variance, find out why. Get them corrected.
   8. Interim interest will be computed as the daily interest times the number of days to the 1st of next month. Your lender may be providing funds to escrow a day (or two) earlier than the scheduled closing date, so the proration start date may not be the same as the closing date.
   9. Insurance and taxes are usually pretty straightforward but check the insurance premium is what you expect.
   10. Title charges are regulated in Washington.
   11. Check the escrow fee is reasonable. Watch out for wire fees and courier service you don’t need. Expect sales tax on some items.
   12. Recording fees are standard.
   13. POC and YSP. They stand for Paid Out of Closing, and Yield Spread Premium. If you find either term listed, it is a fee paid your lender as a back end commission (for selling you a loan with an interest rate above market). It should be listed on your good faith estimate and should not be a surprise to you. If you expected it, fine – good for your lender explaining it. If it is a surprise (and not listed on your good faith estimate), stop. Call your lender and get it removed.
2. Check the transfer deed
   1. Make sure you’re taking title as you planned (married, separate estate, etc..)
   2. Check your name(s) is spelled correctly.
   3. Verify the legal description matches the title report.
   4. If there are any easements benefiting the property are they included in the legal description?
   5. Check that the address to which the deed will be returned is what you want.
3. Check the title report – sometimes the title company will issue a supplemental report just prior to closing so pay attention.
   1. All items that should be cleared are cleared?
   2. Any easements you don’t expect?
   3. Taxes paid?
4. Check the loan note (It will start with something like …I promise to pay….) and any addendum.
   1. Check the interest rate against your Rate Lock Confirmation. They should be the same.
   2. Check you have no prepayment penalty if you don’t expect one. Check against your Truth in Lending form.
   3. If you have an ARM (again all will be in the Truth in Lending form)
      1. check the index
      2. check the margin
      3. check the first adjustment cap
      4. check the lifetime cap

That’s the meat of it. It’s not a substitute for reading everything you sign. Again, I’m not providing legal advice – check with your own attorney (maybe they have additional items you should check). If you find discrepancies in the numbers you expect, ask the closer and/or call your lender. If something is incorrect, get it fixed before you sign.

Figure on taking an hour or so to go through everything and sign. If you need more time, take the forms home with you and come back another day. Again, don’t allow yourself to be pressured into signing anything you’re not comfortable with.