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The FHA Refinance Process Home Equity Conversion Mortgages (HECM) or Reverse Mortgages for Seniors 62 and older You Can Avoid Foreclosure and Keep Your Home IL - HUD Approved Counsing Agencies |
Acknowledgement: Formal declaration before a public official that one has signed a document. Prior to
recording real estate documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the
person’s signature on the document.
Truth and Lending Disclosure: A document required by federal law designed to show a borrower the total cost of
a loan.
Notice of Right to Cancel: The borrower has a legal right under federal law to cancel the transaction within three
business days from the day they sign the documents, the day they receive the Truth in Lending disclosure or the
day they receive the copy of the notice of right to cancel; which ever happens last. In almost all cases, this is the
day that they sign their documents.
Note: A signed instrument acknowledging a debt and a promise to repay per the terms outlined.
Deed of Trust: A three-party instrument between a borrower (or trustor), a lender (or beneficiary) and a trustee (or
neutral third party). The deed of trust is the instrument that is recorded to give added assurance that the
promissory note will be paid when due.
Interest Rate: The percentage of an amount of money that is paid for its use for a specific time period.
Adjusted Rate Mortgage (ARM): A mortgage where the interest rate is not fixed for the life of the loan. These
mortgages adjust periodically based on an index that changes with the market conditions. The rate of interest is
the sum of the index plus a margin (the margin remains fixed for the life of the loan.) Most ARM’s have a periodic
interest rate and payment caps, as well as life caps. ARM’s may also be referred to as AML’s or VRM’s.
Fixed Rate Mortgage: A mortgage where the interest rate is fixed for the life of the loan.
Prepayment Penalty: A charge for the payment of a mortgage or trust deed note before it is actually due.
Real Estate Settlement Procedures Act (RESPA): A federal law that requires lenders to provide borrowers with
information on settlement/closing costs.
HUD 1 Settlement Statement: A closing document required by HUD (Housing and Urban Development) that
outlines the settlement cost of a loan. The closing agent generally prepares the document. The borrower and
lender receives it shortly after the loan is closed.
Deed: Formal written document transferring title to real estate; a new deed is used for each transfer. The deed
should contain an accurate description of the property being conveyed, be signed and witnessed according to
the laws of the State where the property is located, and be delivered to the purchaser on the closing day.
Grant Deed: A type of deed common in California, which contains implied warranties to the effect that the
grantor has not previously conveyed or encumbered the property.
Quit Claim Deed: A deed that conveys whatever present right, title, or interest the grantor may have. Unlike a
grant deed, it does not contain any warranties.
Interspousal Grant Deed: A deed that is used for conveyance of property, interest, or otherwise between husband
and wife.
Joint Tenancy: An undivided interest in property taken by two or more joint tenants. The interests must be equal,
accruing under the same conveyance and begin at the same time. Upon the death of a joint tenant, the interest
passes to the surviving joint tenants rather than to the heirs of the deceased.
Tenancy in Common (TIC): Ownership of property by any two or more persons in undivided interests (not
necessarily equal), without right of survivorship.
Community Property: Property acquired by husband and wife, together or separately, during marriage, when not
acquired as the separate property of either.
Sole and Separate Property: Property owned before marriage or that acquired afterward by gift, bequest, devise,
or descent.
Title Insurance: Assurances as to the condition of title. It protects the owner or other insured, such as a lender,
against loss or impairment of title arising from defects in title.
Non-Recurring Closing Costs: One time costs charged in conjunction with the loan. Some examples are fees for
loan origination, title policy, escrow, credit report, appraisal, tax service, notary, recording, pest control
inspection, etc.
Recurring Closing Costs: Costs that recur after the loan has closed. Some examples are tax reserves, tax
proration, hazard insurance reserve, hazard insurance premium, prepaid interest, etc.
Form W-9: This form is used when a person is required to file an information return with the IRS. They must give
their correct taxpayer identification number (TIN) to report such items as income paid, real estate transactions,
mortgage interest paid, acquisition or abandonment of secured property, or cancellation of debt.
Form 4506: This form is used to get a tax return transcript, verification that you did file a Federal tax return, Form
W-2 information, or a copy of a specific tax form.
(APR) is the cost of the loan in percentage terms taking into account various loan charges of which interest is
only one such charge. Other charges which are used in calculation of the Annual Percentage Rate are Private
Mortgage Insurance or FHA Mortgage Insurance Premium (when applicable) and Prepaid Finance Charges (loan
discount, origination fees, prepaid interest and other credit costs). The APR is calculated by spreading these
charges over the life of the loan. This results in a rate higher than the interest rate shown on your Mortgage/Deed
of Trust Note. If interest was the only Finance Charge, then the interest rate and the Annual Percentage Rate
would be the same.
Prepaid Finance Charges: These are certain charges made in connection with the loan, which must be paid
upon the close of the loan. These charges are defined by the Federal Reserve Board in Regulation Z and the
borrower must pay the charges. Non-Inclusive examples of such charges are: Loan origination fees, Points or
Discount Points, Private Mortgage Insurance or FHA Mortgage Insurance, and Tax Service Fee. Some loan
charges are specifically excluded from the Prepaid Finance Charge such as appraisal fees and credit report fees.
Prepaid Finance Charges: Charges totaled and then subtracted from the Loan Amount (the face amount of the
Deed of Trust/ Mortgage Note). The net figure is the Amount Financed as explained below.
Finance Charge: The amount of interest, prepaid finance charge, and certain insurance premiums (if any) which
the borrower will be expected to pay over the life of the loan.
Amount Financed: This is the loan amount applied for less the prepaid finance charges. Prepaid finance
charges can be found on the Good Faith Estimate/Settlement Statement (HUD-I or IA). For example if the
borrower's note is for $100,000 and the Prepaid Finance Charges total $5,000, the Amount Financed would be
$95,000. The Amount Financed is the figure on which the Annual Percentage Rate is based.
Total of Payments: This figure represents the total of all payments made toward principal, interest and mortgage
insurance (if applicable) over the life of the loan.
Payment Schedule: The dollar figures in the payment Schedule represent principal, interest, and mortgage
insurance (if applicable) over the life of the loan. These figures will not reflect taxes and insurance escrows or
any temporary buy down payments contributed by the seller.
recording real estate documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the
person’s signature on the document.
Truth and Lending Disclosure: A document required by federal law designed to show a borrower the total cost of
a loan.
Notice of Right to Cancel: The borrower has a legal right under federal law to cancel the transaction within three
business days from the day they sign the documents, the day they receive the Truth in Lending disclosure or the
day they receive the copy of the notice of right to cancel; which ever happens last. In almost all cases, this is the
day that they sign their documents.
- * The date of the transaction: the actual day of the signing of the documents.
* The date the rescission expires: midnight on the third (3) business day after the signing
dates; includes: Saturdays. Sundays or Holidays are not included.
* The date of the Confirmation of Non-Rescission or Confirmation Certificate: the day after the
rescission has expired.
Note: A signed instrument acknowledging a debt and a promise to repay per the terms outlined.
Deed of Trust: A three-party instrument between a borrower (or trustor), a lender (or beneficiary) and a trustee (or
neutral third party). The deed of trust is the instrument that is recorded to give added assurance that the
promissory note will be paid when due.
Interest Rate: The percentage of an amount of money that is paid for its use for a specific time period.
Adjusted Rate Mortgage (ARM): A mortgage where the interest rate is not fixed for the life of the loan. These
mortgages adjust periodically based on an index that changes with the market conditions. The rate of interest is
the sum of the index plus a margin (the margin remains fixed for the life of the loan.) Most ARM’s have a periodic
interest rate and payment caps, as well as life caps. ARM’s may also be referred to as AML’s or VRM’s.
Fixed Rate Mortgage: A mortgage where the interest rate is fixed for the life of the loan.
Prepayment Penalty: A charge for the payment of a mortgage or trust deed note before it is actually due.
Real Estate Settlement Procedures Act (RESPA): A federal law that requires lenders to provide borrowers with
information on settlement/closing costs.
HUD 1 Settlement Statement: A closing document required by HUD (Housing and Urban Development) that
outlines the settlement cost of a loan. The closing agent generally prepares the document. The borrower and
lender receives it shortly after the loan is closed.
Deed: Formal written document transferring title to real estate; a new deed is used for each transfer. The deed
should contain an accurate description of the property being conveyed, be signed and witnessed according to
the laws of the State where the property is located, and be delivered to the purchaser on the closing day.
Grant Deed: A type of deed common in California, which contains implied warranties to the effect that the
grantor has not previously conveyed or encumbered the property.
Quit Claim Deed: A deed that conveys whatever present right, title, or interest the grantor may have. Unlike a
grant deed, it does not contain any warranties.
Interspousal Grant Deed: A deed that is used for conveyance of property, interest, or otherwise between husband
and wife.
Joint Tenancy: An undivided interest in property taken by two or more joint tenants. The interests must be equal,
accruing under the same conveyance and begin at the same time. Upon the death of a joint tenant, the interest
passes to the surviving joint tenants rather than to the heirs of the deceased.
Tenancy in Common (TIC): Ownership of property by any two or more persons in undivided interests (not
necessarily equal), without right of survivorship.
Community Property: Property acquired by husband and wife, together or separately, during marriage, when not
acquired as the separate property of either.
Sole and Separate Property: Property owned before marriage or that acquired afterward by gift, bequest, devise,
or descent.
Title Insurance: Assurances as to the condition of title. It protects the owner or other insured, such as a lender,
against loss or impairment of title arising from defects in title.
Non-Recurring Closing Costs: One time costs charged in conjunction with the loan. Some examples are fees for
loan origination, title policy, escrow, credit report, appraisal, tax service, notary, recording, pest control
inspection, etc.
Recurring Closing Costs: Costs that recur after the loan has closed. Some examples are tax reserves, tax
proration, hazard insurance reserve, hazard insurance premium, prepaid interest, etc.
Form W-9: This form is used when a person is required to file an information return with the IRS. They must give
their correct taxpayer identification number (TIN) to report such items as income paid, real estate transactions,
mortgage interest paid, acquisition or abandonment of secured property, or cancellation of debt.
Form 4506: This form is used to get a tax return transcript, verification that you did file a Federal tax return, Form
W-2 information, or a copy of a specific tax form.
(APR) is the cost of the loan in percentage terms taking into account various loan charges of which interest is
only one such charge. Other charges which are used in calculation of the Annual Percentage Rate are Private
Mortgage Insurance or FHA Mortgage Insurance Premium (when applicable) and Prepaid Finance Charges (loan
discount, origination fees, prepaid interest and other credit costs). The APR is calculated by spreading these
charges over the life of the loan. This results in a rate higher than the interest rate shown on your Mortgage/Deed
of Trust Note. If interest was the only Finance Charge, then the interest rate and the Annual Percentage Rate
would be the same.
Prepaid Finance Charges: These are certain charges made in connection with the loan, which must be paid
upon the close of the loan. These charges are defined by the Federal Reserve Board in Regulation Z and the
borrower must pay the charges. Non-Inclusive examples of such charges are: Loan origination fees, Points or
Discount Points, Private Mortgage Insurance or FHA Mortgage Insurance, and Tax Service Fee. Some loan
charges are specifically excluded from the Prepaid Finance Charge such as appraisal fees and credit report fees.
Prepaid Finance Charges: Charges totaled and then subtracted from the Loan Amount (the face amount of the
Deed of Trust/ Mortgage Note). The net figure is the Amount Financed as explained below.
Finance Charge: The amount of interest, prepaid finance charge, and certain insurance premiums (if any) which
the borrower will be expected to pay over the life of the loan.
Amount Financed: This is the loan amount applied for less the prepaid finance charges. Prepaid finance
charges can be found on the Good Faith Estimate/Settlement Statement (HUD-I or IA). For example if the
borrower's note is for $100,000 and the Prepaid Finance Charges total $5,000, the Amount Financed would be
$95,000. The Amount Financed is the figure on which the Annual Percentage Rate is based.
Total of Payments: This figure represents the total of all payments made toward principal, interest and mortgage
insurance (if applicable) over the life of the loan.
Payment Schedule: The dollar figures in the payment Schedule represent principal, interest, and mortgage
insurance (if applicable) over the life of the loan. These figures will not reflect taxes and insurance escrows or
any temporary buy down payments contributed by the seller.
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