First Guardian Title & Escrow

	The Settlement Statement or HUD-1
		This document contains all of the fees and costs associated with the purchase and sale, or the refinance, of your property. Click here to see a PDF sample settlement statement with explanations.

	*Note*
		The note is the document you will sign that lays out the terms of the loan. In the note you will find your loan amount, interest rate, length of loan, first and last payment dates, and late payment penalty. If your loan is an adjustable rate loan, you will also find the adjustment dates and calculations, including maximum and minimum rates over the life of the loan.

	Deed of Trust
		The deed of trust is the document that secures the loan with your property. The document explains how a deed of trust works under state law. It explains the rights and obligations of the borrower, the lender, and the trustee. In basic terms, the trustee is an individual or company that the lender chooses to represent their interests should it become necessary to foreclose on the property. The trustee’s name and address will be listed in the document. The deed of trust will be recorded in the land records in the county or city courthouse. Once you pay off your loan, a certificate of satisfaction or release must be recorded in the land records as evidence that the property is now free of that obligation.

	*Deed*
		The deed transfers the property from one party to another and will be recorded in the county or city land records. Generally, the deed that will be signed at your purchase will contain the names of both the buyers and the sellers, the description of the property, and the type of tenancy under which the purchasers will hold the property. Most purchasers will take the property as a sole tenant, as tenants-in-common, as joint tenants with the right of survivorship, or as tenants by the entirety. A sole tenancy is simply property owned by one person. Tenants by the entirety and joint tenants with the right of survivorship are similar in that should one of the owners die, the other owner automatically assumes all interest in the property. The difference between the two is that only a husband and wife can hold property as tenants by the entirety, whereas most people can hold property as joint tenants with the right of survivorship. Tenants-in-common also own the property together; however, upon the death of one of the owners, the other owner(s) does not assume the deceased person’s rights in the property. The deceased owner’s share of the property becomes part of his/her estate and will pass onto his/her heirs. It is important to specify how you wish to hold the property. Also, on occasion, one person gets a loan to purchase the property, yet would like to have an additional person on the deed. If that is the case, let us know that in advance. You should also inform your lender that you plan on having a second person on the deed, since the lender will have to add the additional person to some of the loan documents for him or her to sign.

	Affidavits
		There are a few affidavits that are normally required to be signed at settlement. The lender usually asks for a name affidavit to be signed. The name affidavit shows any other names that you may have been known as and asks you to state that you are one and the same person as those other names. For example, a married woman might have her maiden name included or borrowers might have their names listed with and without middle initials or middle names. You may also be asked to sign an affidavit that states that you haven’t gone bankrupt, that you are still employed, that your financial status or marital status hasn’t changed, that there are no liens on the property, and so on.

	Right of Rescission
		When refinancing your personal residence, federal law gives you a three-day period to cancel the transaction after you have signed all of the papers. This is your right of rescission. That means that you have three days to read through the documents, think about the loan, and then cancel the transaction if you so choose. At the settlement, you will sign a statement that says that you have received two copies of the right of rescission notice. The right of rescission notice will describe the right of rescission and it will also show the date by which you must rescind. The notice will provide instructions on how to rescind as well. If you wish to keep the loan, some banks will ask you to sign an acknowledgment that states that three days have passed and that you still want the loan. Other lenders will not require that acknowledgement.

	Truth-In-Lending Statement
		The Truth-In-Lending statement is required by federal law and is designed to show a borrower the true cost of the loan as well as other key terms of the loan. You may have already received a copy of this during the loan process itself. In the Truth-In-Lending, you will find the A.P.R. or the annual percentage rate. The A.P.R. is often different from your actual interest rate because the A.P.R. includes any points or loan fees, as well as your interest rate. This is what the money actually costs you to borrow. This document also states, among other things, the total finance charge in dollars, the total amount you will pay back over the full term of the loan, and whether your loan is assumable or not.

	First Payment Letter
		The first payment letter shows the total monthly payment as well as the first payment due date. It will also break down the total payment into principal and interest plus any escrows that are being collected. Many lenders also include the mailing address to which you will send your payments. Some lenders will include a starter payment coupon or two as part of the first payment letter. Other lenders may provide a separate sheet with starter payment coupons.

	Escrow Disclosure Statement
		Disclosure Statement: Most lenders require that you establish an escrow account through which the lender will pay your property taxes and your property or hazard insurance. If PMI (private mortgage insurance) is required for your loan, money for this will be escrowed as well. The escrow disclosure statement will show the amount of money that you are paying into the escrow account and it will show when and for what the lender is making payments on your behalf. This statement will also show how much money is in your escrow account from month to month, as well as the cushion selected by the lender. If, for example, taxes or insurance costs increase, the lender will ask you to put more money into your escrow account so that there are adequate reserves (the cushion) in the escrow account.

	Flood Hazard Insurance
		Generally, the lender will order a flood certificate which will show whether or not your property is located in a flood zone. Most likely the property will not be located in a flood zone. If that is the case, the lender will ask you to sign a form that states that if, in the future, your property is found to be in a flood zone, you authorize the lender to purchase flood insurance on your behalf for which you will reimburse the lender. If the property is located in a flood zone, the lender will most likely require that the property be covered by flood insurance as a requirement for obtaining the loan.

	Compliance Agreement
		Sometimes there are mistakes in the paperwork that a lender sends to be signed. By signing the compliance agreement, you are agreeing to assist the lender in correcting those mistakes. An example of your assistance may include being asked to sign a document that wasn’t sent to the closing or you being asked to re-sign a document that needed to be corrected. You may also be agreeing to cooperate with the lender if they need your assistance in response to their being audited by a regulatory agency.

	Assignment Disclosure
		Lenders often sell or assign their loans to investors or other lenders. One of the documents that you will sign is a disclosure regarding this fact. The lender will disclose that they may assign your loan. They may also disclose how often they have assigned other loans over the past three years. By signing this form, you are simply stating that you’ve received it and that you understand that your loan may be assigned. If your loan is assigned to another lender, your rates or fees will not be affected. The end result to you is that you will be sending your payment to a new place. You will receive something in writing if your loan is assigned.

	Loan Application
		You may be asked to sign an original loan application at the settlement, even if you have already signed one during the loan application process.

	Limited Correction Power of Attorney
		Although you will go over the documents at the closing, occasionally some typos or other clerical errors slip by. By signing this document, you will allow the title company to correct any such mistakes on your behalf. The bank may also ask you to sign a similar form which gives them the right to make such corrections on your behalf.