Critical Closing Documents in a Loan Signing

Successful Notary Signing Agents are familiar with the different types of closing documents. A big part of the job includes walking signers through each document without giving unauthorized counsel or advice to signers. If becoming a Notary Signing Agent is part of your notary business plan, start learning as much as you can about these documents before signing up for an exam or submitting to a background check. 

Here are some critical documents to know, some tips on presenting these documents, and what to do if any are missing or incomplete documents. 

What is a closing package? 

A closing package is all the paperwork that a borrower signs during a real estate transaction. These documents contain agreements, authorizations, contracts, disclosures, instructions, notices, and statements. 

Within the closing package, you’ll find a few that are known as “critical documents.” These include Deeds, Promissory Notes, Closing Disclosures, and Notice of Right to Cancel (also known as Right to Rescind).

Which documents are included depends on the type of real estate transaction or loan product. For instance, if a consumer changes their mind within a certain time frame, they have a chance to cancel most non-purchase money mortgages, which includes refinances and home equity loans. These types of closing packages will include a closing document called a Notice of Right to Cancel. 

Some of these documents require notarization while others only require a signature. 

Critical Closing Documents to Know

1. The Deed
2. The Mortgage, Deed of Trust, or Security Instrument 
3. The Promissory Note
4. The Notice of Right to Cancel or Right to Rescind

The Deed 

The deed is a written legal instrument and an important chain of title document, establishing a clear ownership history. The person selling, conveying, or transferring the property is called the Grantor, and the person buying or receiving the property is called the Grantee. 

The deed includes important owner, seller, and property information like: 

• Grantor’s name, relationship status, and address
• Grantee’s name, relationship, and address
• The property’s parcel number and legal description

The deed is signed by the seller or current owner, notarized, and recorded in the public land records office of the property’s governing jurisdiction. 

In some states, deeds must also be signed by one or more witnesses who watch the Grantor (property owner) sign the deed. In some cases, the notary may act as the witness, but some notaries prefer not to volunteer to serve as the witness. Should the deed be challenged in court, the other party’s witnessing signature bolsters the document’s integrity. The contracting company that assigns you the loan signing, which could be the lender, the title company, or a loan signing service, may have specific requirements on how to handle witnesses.

Different Types of Deeds

There are lots of different types of deeds. Some are used to convey property without a real estate transaction (an estate planning tool to pass property to heirs without probate). Some are used to correct previous mistakes or title defects in the public record, while others are used to transfer title rights with no guarantees, warranties, or covenants.  

The most common type seen in real estate transactions is the general warranty deed.

See an example of a Florida General Warranty Deed.

Why do deeds need to be notarized?

Deeds executed properly in the presence of a notary help to deter fraud and preserve the quality of land records. Although county recorders have requirements that documents must meet before recording, officials in these offices don’t check a document’s validity before recording it. Without scrupulous notaries, criminals would have more opportunities to commit deed fraud. 

Notarized deeds provide title professionals, lenders, and homebuyers with a higher degree of certainty when issuing title insurance, financing home loans, and purchasing a home.

The Mortgage, Deed of Trust, or Security Instrument

Depending on where you work, a real estate closing financed by a lender will always have either a Mortgage, Deed of Trust, or other Security Instrument. All three function in the same way: to guarantee the lender a right to the property should the borrower fail to meet the loan agreement terms. Violating the terms of a loan allows the lender to declare the borrower in default and begin foreclosure proceedings. 

Like the deed, the security instrument is also signed, notarized, and recorded in the public land records.

Sample Deed of Trust. 

The Promissory Note 

In addition to the Mortgage or Deed of Trust, the promissory note is an official IOU signed by the borrower. The buyer promises to pay back the mortgage. This document might also be called a lending agreement, promise to pay, or simply “the note.” 

The promissory note lists some of the details of the loan, including: 

• The finance amount
• The interest rate of the mortgage loan
• The type of rate (fixed or adjustable) 
• The payment dates 
• The length of time for repayment 
• The consequences of late payments

Typically, the promissory note doesn’t require notarization. However, some lenders may request notarizing one since that can help strengthen its legitimacy and eliminate any disputes in court over its authenticity.

See an example of a Promissory Note.

The Closing Disclosure 

The Closing Disclosure is a five-page document the borrower receives from their lender detailing critical aspects of the loan and fees associated with the closing. The Closing Disclosure is a combination of what used to be called the HUD or Settlement Statement and the Truth in Lending Statement. You’ll likely hear title agents or other real estate professionals still refer to it as the HUD. 

Some of the critical items listed in the Closing Disclosure include:

• The name and address of the borrower 
• The loan amount 
• The interest rate 
• Payment penalties 
• Estimated monthly payments
• Closing Costs
• Cash to Close – the amount the signer needs to pay at closing
• Itemized list of services and fees 
• Seller credit – the amount the seller agreed to contribute toward closing costs
• Escrow Account information – Usually, the mortgage, homeowner’s insurance, and property taxes are bundled in the monthly payment. A section in the Closing Disclosure will indicate if an escrow account will be set up, what costs will be included in the account, and the amount of each. If there is no escrow account, the borrower will pay these costs in yearly lump sums. 
• Contact information of the professionals involved in the closing – lender, mortgage broker, real estate brokers, and settlement agent
• Other disclosures and contract details

The borrower signs the Closing Disclosure to confirm receipt. It doesn’t require notarization. The borrower keeps one copy of the Closing Disclosure.

Get a detailed look at a Closing Disclosure.

Lenders are required to provide the closing disclosure three days before the closing, so borrowers can review the information carefully, compare the final numbers against the Loan Estimate, and resolve any issues. 

💡Notary Tip: Sometimes, the correct Closing Disclosure isn’t delivered before the signing. After receiving the final closing package from the title company or other contracting company, send a copy of the final Closing Disclosure to the signer(s) to review beforehand. 

Notice of Right to Cancel 

The Notice of the Right to Cancel is also called the Right to Rescind. This document alerts consumers to their right to cancel the loan without cost, but it’s only applicable to certain loan types. It doesn’t apply to the sale of a home, but it will be part of home equity loans, refinances, and home equity lines of credit (HELOCs). 

The Notice of Right to Cancel will provide details like: 

• The timeframe to cancel 
• How to cancel
• The name of the creditor

The borrower signs the Notice of Right to Cancel and receives two copies.

See an example of a Notice of Right to Cancel.

Presenting the Closing Documents

Non-attorney notaries have to be careful about what information they give to signers during a real estate closing. In the Notary Signing Code of Conduct, Guiding Principle 4 lays out how notaries are to present closing documents: 

4.4. Presentation of Documents:
The Notary Signing Agent will present each closing document to a signer in conformance with a signing presentation guidelines authorized by the contracting company, and by naming and stating the general purpose of the document, specifying the number of pages and indicating where signatures, dates, or initials are to be placed.

Essentially, you may describe the documents, but you can’t interpret or explain beyond what is present in the document. Notaries should remain impartial and patient with signers as they review each document. The notary may provide the signer with the contact information of the lender’s representative or closing agent to answer any question about the loan, explain the terms of the loan, or other fees listed in the documents. 

What to do if a document is incomplete or missing

Notaries should alert the title company, lender, or signing service that created the assignment if they discover any issues with the documents in the closing package. If the signer requests any changes, again, contact the company responsible for the assignment. Do not alter or add a document unless explicitly authorized in writing by the lender’s representative or title company with the exception of notarial certificate wording. Notaries may adjust the language in the notarial certificate to comply with state rules and regulations.

These four documents are only a handful of the many documents a notary will see during a loan signing. For a list of more closing documents and additional information on how to present them, check out these Signing Presentation Guidelines from the Signing Professionals Workgroup.

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