Explanation Of The Legal Documents Required In Buying A House
Q. When do I receive the deed to my house? I understand that the lender
retains the deed of trust until the mortgage has been paid off and then
returns it stamped “paid and canceled”. But I thought that the deed to the
house is to be returned to me after it has been recorded. The title
company that conducted my settlement says they will retain it in their
files. They have sent me a copy, but refuse to release the original. Is
A. Absolutely no, and I am surprised that the title company has taken that
Once the deed recorded among the land records in the county (or city)
where your house is located, the deed itself is not an important document.
You probably will never need it again -- even when you go to sell the
But, the deed belongs to you and you should demand that the title company
release it immediately.
Typically -- and depending on the jurisdiction where the deed is recorded
-- it can take weeks (if not months) for the recorded deed to be returned
to the title company or attorney that conducted the real estate
settlement. But once the deed has been returned, the title company (or
attorney) should send it to you with the title insurance policy which you
probably purchased when you went to settlement.
The deed should contain -- on its face -- the recording information.
Usually it is a document number assigned by the Recorder of Deeds. This is
your proof that the deed has, in fact, been recorded.
If the title company continues to refuse to release the original deed back
to you, I suggest that you contact the insurance commission in the state
where your property is located.
Your question prompted me to expand on the various legal documents which a
buyer has to sign when settlement takes place. Here are some of the
Deed: this is the legal document which transfers the property from your
seller to you. You should review it carefully at settlement to make sure
that your name (or names) are spelled correctly, and that the legal
description is correct. If you are taking title with another person (a
spouse or a friend) make sure that the status of title is the way you want
it. If you are in doubt as to how title should be structured, discuss the
matter with your legal advisor before you go to settlement.
Promissory Note: Assuming that you are not paying all cash for your new
house, you will be getting a loan from someone. It could be from family or
from a mortgage lender. Either way, you will have to sign a promissory
note. This is, in effect, an “IOU”. You promise to pay your lender the
full amount, payable in equal monthly installments, at the interest rate
previously agreed upon. This is an extremely important document; you must
review it carefully before it is signed. Your lender will keep the
original until you completely pay off the loan. But you must get a copy of
the note at settlement (or shortly thereafter).
Deed of Trust: This is the mortgage document. As you stated in your
question, it is recorded among the land records, and your lender will keep
the original. When you pay off the loan, the lender will return it with
the promissory note. This document is rather lengthy -- and quite
legalistic. Make sure that the person conducting the settlement fully
explains all of the ramifications and conditions contained in this
document. Basically, so long as you make your monthly payments on a timely
basis, you should have nothing to worry about. But once you are in default
(a term which is defined in both the note and the trust) then many of the
provisions of that deed of trust become operative -- such as the right of
the lender to ultimately foreclose on your property.
It should also be noted that you cannot deduct any mortgage interest for
tax purposes unless your property is secured by a deed of trust. That
means that the deed of trust must be recorded in land records.
Settlement Statement: After Congress enacted the Real Estate Settlement
Procedures Act (RESPA) several years ago, the Department of Housing and
Urban Development (HUD) promulgated a uniform settlement statement. It is
now commonly referred to as the HUD–1. This document contains the
financial picture relating to the sale -- and the purchase -- of the
property. It lists the lender’s charges, the title company’s fees, and the
governmental recording fees. Next to the promissory note, it is my opinion
that this is perhaps the second most important document. You should review
it very carefully -- item by item. You should also keep this document for
as long as you own the property. It will be useful for income tax purposes
next year when you file your income tax return, and it may also be useful
when you sell the house. Many of the items on the HUD-1 (such as recording
and transfer taxes) can be used to reduce any profit you have made when
Survey: Although not all lenders require that the purchaser obtain -- and
pay for -- a survey of the property, I definitely recommend that every
purchaser authorize the settlement provider to obtain a property survey.
It should be noted that the typical survey that is provided at a
settlement only shows the location of the house on the lot. While the
title insurance industry will generally not accept a title claim based
solely on the survey itself, the survey will assist the purchaser in
determining whether fences, trees or other such objects are properly
located within the property being conveyed.
Miscellaneous Documents: Lenders like to add a number of other documents
-- such as the Truth in Lending disclosure statement, tax id number, name
affidavit, etc. -- to the pile of documents which the buyer has to sign in
order to complete settlement. Although many of these are unnecessary, some
are required by law or by the secondary mortgage market. The bottom line,
however, is that if you want the loan, you have to comply with these
For many years I have encouraged lenders to try to reduce the unnecessary
paperwork which is required at a settlement. Indeed, when former Chief
Justice Burger retired from the United States Supreme Court, he stated in
a speech to the American Bar Association that he could have sold a
multi-million dollar jumbo jet with less paperwork than was involved when
he sold his single family house in the Commonwealth of Virginia.
But, the paperwork persists. Be prepared to sign a lot of documents when
you go to settlement.