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Loan Closing

You should keep a copy of every document you signed your name to at the closing meeting. It’s especially important to keep a copy of your settlement form. You will find it useful when you file your taxes and if you sell your home. For example, the real estate taxes and loan discount points you paid as part of your closing costs are tax deductible. So, when you file your taxes, you will need to refer to your settlement form to get these amounts.

In addition to the closing documents, you should keep all insurance records, such as homeowner’s and title insurance. You would need to have access to your homeowner’s policy if, for example, someone were to sue you because they were injured on your property. You would refer to your title insurance policy if you were to find a flaw in the title after you bought the house. It’s a good idea to keep these important records in a safe place. You may store them in a safety deposit box or a bank vault in addition to keeping a copy of them in your home.

Your mortgage note (one of the closing documents you signed) states the terms of your mortgage, including the date on which your payments must be made, the location to which they must be sent, and the penalty charged for late payments. Usually after the closing meeting, your lender sends you a coupon book to simplify the mortgage payment process. Each month, tear off a new page from the book and mail it with your check. Remember to write your loan number on the check to ensure that your payment is credited correctly. Some lenders can automatically deduct your monthly payment from your checking account. This saves you time and postage costs. And, it can prevent the possibility of missing a payment. You can ask if your lender provides this service.

At the closing, your lender is legally obligated to provide a statement showing how frequently your lender transfers (or "sells") servicing on mortgage loans to a third party. This means that someone other than the lender who originated and approved your loan will service the loan. Servicing includes the collection and processing of your monthly payments. You must be notified of the transfer by both your original lender and the new lender. Remember, never send your mortgage payment to a different party until you’re officially notified of the transfer by your lender. In some instances, your lender may sell your mortgage to an investor, such as Fannie Mae®. This is how Fannie Mae makes sure lenders don’t run out of mortgage money. However, you would still send your monthly payment to the lender who services your loan.

Any time you have questions about the terms of your loan or run into complications, contact your lender. You may have an emergency that changes your financial situation. For example, if you’re laid off from your job or if you’re sick and temporarily unable to work, you should contact your lender immediately if you have a problem making your monthly mortgage payment. Otherwise, you risk losing your home. Your lender should be willing to work with you to resolve the problem. Various types of relief may be offered to give you additional time to make the payment. At the end of each year, your lender will be in contact with you. You’ll receive a statement that shows your mortgage balance and the total amount you’ve paid in principal and interest. You’ll need to know the amount of interest paid to file your taxes. The tax deduction for interest alone may save you thousands of dollars in federal income taxes. Especially in the early years of your mortgage, the bulk of your monthly mortgage payment is interest.

Your mortgage requires that you adequately maintain your property and not allow it to deteriorate. And, as a homeowner, you can’t afford to sit back and defer maintenance. You can extend the life of appliances and fixtures and avoid expensive repairs by doing routine maintenance yourself. It’s a good idea to set up a budget for your home’s regular maintenance and unexpected repairs. You may want to budget 1 percent of the purchase price of your house to cover annual maintenance and repairs. You also want to adhere to a regular savings plan to cover essential bills, emergency repairs, and large, periodic expenses such as property taxes and homeowner’s insurance (if they’re not held in an escrow account by your lender). Some financial advisors suggest saving 5 percent of your take-home pay. You must commit this amount every payday to make it happen. The following seasonal checklist will give you an idea of what you can do in the fall and spring each year to maintain your home: