The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
Annual Percentage Rate (APR)
The cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans, however APR should not be confused with the actual note rate.
Good Faith Estimate (GFE)
A Good Faith Estimate is an itemized list of fees and costs associated with your loan. These fees, also called settlement costs or closing costs, cover every expense associated with your loan, including loan charges, inspections, title insurance, taxes, insurance, closing agent fees and other charges. Itemized charges on your GFE are numbered to correspond to the items on your HUD-1 Settlement Statement.
Truth in Lending (TIL)
Truth in Lending (TIL) is an act of the federal government designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs. Your TIL Disclosure Statement lists your Annual Percentage Rate, which is defined as the cost of credit over the life of the loan, your total finance charges for the term of the loan, the total amount financed and the final total you will have paid after you have made all payments as scheduled. Also included is the total number of payments you will be making and the amount of each. Any fees such as filing or recording fees, late charge fees, and special insurance such as hazard or flood, if required, will also be listed here. The form indicates if the loan is assumable, as well.
HUD-1 Settlement Statement
One business day before the settlement, you have the right to inspect the HUD-1 Settlement Statement. This statement itemizes the services provided to you and the fees charged to you. This form is filled out by your closing agent and Page 2 of this document is reflective of the Good Faith Estimate you were provided at your initial application. If you choose not to review this statement prior to closing, a copy will be delivered to you after settlement by the closing agent.
Confirmation of Loan Terms
Your Confirmation of Loan Terms is the contract that locks in the terms of your loan. This document states the loan program you are agreeing to and will be explained by your loan officer. You have the option to go with a "float" which allows you to wait and decide when to lock provided you do so before your loan is closed. Choosing to "float" gives you the flexibility to gauge market conditions. If offers no protection of a specific interest rate and you bear the responsibility of watching the market. Since market conditions can change quickly, locking your rate protects you against the possibility of rising interest rates. The Confirmation of Loan Terms also carries an expiration date and your loan must close before that date arrives or you risk losing your rate which could incur additional charges to relock your loan. It is important that you review all the conditions attached to locking your rate. Please ask your loan officer about anything that is unclear to you before you sign this document.
The Note is the borrower's promise to pay back all monies borrowed from the lender. It is a binding contract and should be read carefully. The Note lists the principal amount borrowed, plus interest rate, first payment due date, final payment due date, and it indicates if your loan is a Fixed Rate loan or Adjustable Rate loan. It also states the rights you and the lender have in relation to the transaction, and the obligations you are incurring. Please ask your closing agent about anything you do not understand prior to signing this document.
Deed of Trust
The Deed of Trust is the Security Instrument that attaches a lien to the property to enforce the terms of the Note. It contains all the rights and agreements made by both parties. Depending on the type of loan and property being financed, there could be specific riders attached to the Deed of Trust which change some of the wordings in the original document. The executed Deed of Trust is recorded at the courthouse in the county in which your property is located and becomes a public record. Be sure to read each part carefully and ask your closing agent any questions about areas you do not understand as this document is enforceable by law and will be used in the event a foreclosure becomes necessary. Your spouse, if applicable, will also be required to sign this document even if they are not a borrower on the loan.