What should we keep from our loan closing documents?

Question of the week: What should we keep from our loan closing documents?

Answer: Because our industry is very paper oriented, lots of paper oriented, this is a question that primarily comes from minimalists.

The IRS suggests keeping tax records for three years, or two years after you have paid your taxes, whichever is later. In some cases, they suggest you retain records for seven years. (IRS on record retention)

However, depending on the transaction for your mortgage you may want to retain some of the records longer.

To make sure we are clear, the documents we are discussing are forms from your loan application and closing. Not the statements, paystubs, tax documents you provided the lender, but the documents and forms provided to you by the lender, title company and escrow company.

As part of your mortgage transactions, either purchase or refinance, you will receive from the County Recorder where the property is located original copies of any Deeds that have been recorded.

It is very important that you keep all recorded deeds. As well, if you refinance or payoff a mortgage the recorded reconveyance which is filed by lenders when a mortgage is paid off—this instrument removes the mortgage from your property as a lien.

Back to application and closing documents.

For application documents, I can see no reason to retain any of them once the mortgage closes. These can, and should be, disposed of properly. *

For closing documents, I suggest you retain copies of the deeds, at least until you receive the originals from the recorder, and your closing statement from escrow which details the terms of the transaction and amounts you paid and/or received as part of the transaction, for tax preparation for the year of the transaction. Per the IRS you should retain the closing statement for a minimum of three years.

As well, you should retain a copy of the Note, which details the terms of your mortgage, for as long as you have the mortgage. Most lenders will provide a copy of your Note; however, it may take a while to get a copy if needed, and if your mortgage servicing is sold or transferred the document may get lost in transition.

If you close on a Home Equity Line of Credit, HELOC, I recommend you retain the Credit Agreement, which also details the terms. Should your refinance later and wish to retain your HELOC the refinancing lender will want a copy of this document.

With the ability to store and retain records electronically many people are less willing to retain paper records. If you transfer your application and closing documents to electronic records make sure they are securely backed up.

A quick recap, from the application forms and documents I see no reason to retain any of them. From your final closing documents, I suggest you retain the final closing statement as well as the Note and any recorded deeds.

*For proper disposal please shred all personal and financial information. I recommend every home have a small shredder. As well, see the final section for an opportunity to dispose of your records, provided you are met the IRS timing requirements.

Have a question? Ask me!

Rates for Friday April 23, 2021:  Rates lean a bit lower this Friday, and we may see a dip next week, as investors have been going in and out of equities depending on what the rumors are from Washington for changes to the tax code—most importantly the proposals being batted about for capital gains taxes. Investors contemplating which will have more impact on returns, inflation from the trillions coming from Washington, or slowdown caused by reduced transfer of assets from dramatic increase in taxes on these transactions. Indecision such as this usually benefits lower rates.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30 year conforming                                         2.75%   Flat

30 year high-balance conforming                   2.875%  Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Where do you keep your files and documents that need to be destroyed? In boxes in the garage? File cabinets in your office or spare bedroom? Garbage bags in the garage? How would you like to get rid of these piles, stacks and boxes, safely and securely?

This Sunday, April 25th,  I am co-hosting with Koh Realty Group a shredding event from 100:00 – 1:00. The address is 5222 E Los Altos Plaza, Long Beach.

Remember, three years retention for tax documents, if you have any older documents taking up room in your house that you have been wanting to securely destroy, come see us on Sunday!

Have a great week,

Dennis

Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog