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Know Your Mortgage

Gather Your Loan Documents

Gather your mortgage loan documents. It is important that you fully understand the terms of your mortgage.A certified housing counselor can help you with navigating through them. These documents include:

The Promissory Note - This is the legal evidence of indebtedness and formal promise to repay the debt. It sets out your loan amount, your payment date, the payment amount or how your payment amount will be determined and the maturity date. It also includes the penalties and steps the lender and servicer 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 of the money)

Adjustable Rate Mortgage Rider (ARM Rider) - Adjustable-rate mortgages (ARMs) are loans with interest rate and payment changes. ARMs may start with lower monthly payments than fixed-rate mortgages.

There are two important considerations:

• adjustment period – how often does the interest rate change and when does the payment change
• borrower notification – when are you notified of the change

The interest rate on an ARM consists of two parts: the index and the margin.The index determines how the interest rate will change and the margin is an amount that is added to the index to determine the new interest rate. There are different types of ARMs - hybrid ARMs, interest-only ARMs and payment-option ARMs

Prepayment Penalty Rider - A prepayment penalty allows the lender or servicer to charge the borrower additional interest, (typically six months), 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 contains a prepayment penalty, this should be clearly stated in the mortgage disclosures, mortgage note and/or prepayment penalty rider to the note.

TIL (Truth in Lending) Disclosure Statement - This document must be provided at application and at closing on certain loans. It shows the estimated total costs of borrowing, expected payment amounts over life of loan and other significant features of your loan such as a prepayment penalty.

HUD 1 Settlement/Closing Statement – This document contains all the costs to you that are associated with the purchase of your home and the loan. It is provided to you at the loan closing.

Last Two Mortgage Statements

CALL YOUR MORTGAGE COMPANY/SERVICER IF YOU KNOW YOU’LL BE LATE AND ALWAYS RETURN THEIR CALLS!!

Let’s work together!

Derek O’Toole

Helping Hands Solution AZ