Here’s a brief look at common mortgage forms that you’ll likely come across when purchasing a home.
This document is legal evidence of indebtedness and a formal promise to repay the debt. It sets out the amount and terms of the loan and recites the penalities and steps the lender can take if you fail to make your payments on time.
Deed of Trust
The deed of trust helps to verify and protect the legal interest in a property. The property is deeded by the title holder (trustor) to a trustee (often a title or escrow company) which holds the title in trust for the beneficiary (the lender).
Prepayment Penalty Rider
A prepayment penalty on a mortgage allows the lender to charge a borrower additional interest, typically six months worth, when a mortgage is repaid during the penalty period, which is usually somewhere in the first three to five years of the mortgage. If a mortgage does have a prepayment penalty, this should be clearly stated within the mortgage disclosures, mortgage note, and or prepayment penalty rider to the note.
The Truth in Lending Disclosure Statement (TIL)
This disclosure is required by Federal Law and must be given within 3 business days of initial loan application. The purpose of the TIL is to:
- Show estimated total costs of borrowing.
- Outline expected payment amounts over the life of the loan.
- Disclose other significant features of your loan.
Hud 1 Settlement / Closing Statement
- Prepared initially by the lender and then finalized by the title company.
- Required by federal law.
- Provides details of sale transaction.
- Must be signed by both buyer and seller and becomes part of the lender’s permanent loan file.
Adjustable Rate Mortgage Rider
Adjustable rate mortgages (ARMS) are loans with interest rates that change. ARMS may start with lower monthly payments than a fixed rate loan but have the ability to adjust on a regular basis known as the adjustment period. The interest rate on an ARM is made up of two parts: The index, and the margin. There are different types of arm loans available including Hybrid Arms, Interest only ARMS, and Payment-option ARMS.