The End of Your Home Loan Journey

Getting to closing day for your FHA home loan is a big deal. You've saved, you've house hunted, and you've found the property you want to own.

Before you can accept the keys and move in, there's a process leading up to closing day you must participate in, starting with the review of your closing documents, closing costs, and a final walk-through of the home.

This list of frequently asked questions about the process can help you better prepare for it, as we'll discover below.

What is the Closing Disclosure, and why is the three-day review period so important?

The Closing Disclosure is a five-page, standardized government form that lists the final, official terms and costs of your mortgage. It's the single most important document you will receive before you sign your loan. 

Federal law requires your lender to provide it to you at least three full business days before your closing date. This waiting period is a critical consumer protection.

It gives you the necessary time to review every detail, ask questions, and ensure the loan you are about to sign is the same one you were offered, without the pressure of the closing table.

What should I check when comparing the Closing Disclosure to the Loan Estimate?

You should compare the two documents side-by-side. First, confirm the most basic loan information: the interest rate, loan term, total loan amount, and whether it has features like a prepayment penalty. These should not have changed. Next, turn to the closing costs on page two. 

Check the fees in the "zero tolerance" category, such as the lender's origination fee. Have they increased? Review the group of third-party service fees, like the appraisal and credit report, to ensure their total has not increased by more than 10%. 

Finally, review all other figures for accuracy, including any credits from the seller. If you find any errors or have any questions, you must contact your lender immediately to resolve them during the review period.

What am I looking for during the final walk-through?

The final walk-through is your last chance to view the property before the title transfers to you. Your first goal is to verify that the home is in the same condition it was in when you agreed to buy it, checking for any new damage that may have occurred during the seller's move-out.

Your second goal is to confirm that all contractually obligated repairs have been completed satisfactorily. Bring your repair agreement with you and check each item.

Finally, you must ensure that all items included in the sale (like appliances) are present and that the seller has removed all their personal property and trash.

Why can't I use a personal check for my closing costs?

A personal check is not considered "good funds" because it is not guaranteed. The funds are not drawn from your account until the check is cashed, and there's a risk it could bounce. At a real estate closing, the transaction must be finalized and funded immediately so that the deed can be recorded and the seller can be paid. 

For this reason, closing agents require certified funds, which are guaranteed. This means you must use a cashier’s check (which is drawn against the bank's own funds) or a wire transfer (a direct electronic transfer from your bank to the closing agent's account).

What is the role of the Promissory Note versus the Mortgage document?

Although you'll sign many papers, these are two of the most important. The Promissory Note is, simply, your promise to pay. It is the legal evidence of your debt to the lender and includes all the terms of repayment, such as the amount, interest rate, and payment schedule. 

The Mortgage (or Deed of Trust in some states) is the security instrument. This is the document that gives the lender a legal claim against your property. It's what allows the lender to foreclose if you fail to repay the loan as agreed to in the Promissory Note.

What should I do if I don't understand something at the closing table?

Ask for a clear explanation before signing anything. Do not feel pressured to rush. The closing agent is there to facilitate the signing and can explain the purpose of each document. You have the right to understand everything you are signing. 

If you have any lingering doubts or see something that contradicts your final Closing Disclosure, you have the right to halt the proceedings and contact your lender or a legal advisor. Signing these documents creates a long-term legal and financial obligation, and you must be confident in what you are agreeing to.