Sundance Mobile Notary
Mobile Notary Public and Certified
Notary Signing Agent
Berkeley / Oakland / San Francisco California
510-681-0045
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Sundance Mobile Notary |
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Glossary |
Glossary of Loan and Notary Terminology
Here are some of the more commonly-used words and terms you may encounter when dealing with real estate loan documents and notarizations. We hope you find this information helpful.
Acknowledgment
Documents requiring a notarization in the
form of an acknowledgment do not have to be signed in the notary's presence.
However, the signer must appear before the notary at the time of the
notarization to acknowledge that he or she freely signed for the purposes stated
in the document. An acknowledgment certificate (completed by the notary)
indicates that the signer personally appeared before the notary, was properly
identified by the notary, and acknowledged to the notary that the document was
freely signed. Most notarizations are acknowledgments. (compare to
jurat)
Adjustable
Rate Loan or Adjustable Rate Mortgage (ARM)
A loan with an interest rate that changes during the term of the loan.
The payments generally increase or decrease with the interest rate. The rate is
based on one of several "index" options.
Affidavit
A written statement, signed in the presence of a notary, in
which the signer swears under oath that the information provided is true and
correct to the best of the signer's knowledge. (see
jurat)
Amortize
To pay off a debt in installments that include both principal and
interest.
Amount Financed
A required Truth in Lending Act disclosure for consumer loans.
Calculated by starting with the full amount borrowed (principal) and subtracting
out the dollar amount of prepaid finance charges (finance charges the borrower
is paying in advance).
Apostille
A document required by foreign countries
attesting to the validity of a notarized signature on a U.S. document. (Also
applies to certain non-notarized certified copies.) In California,
apostilles are performed by the California Secretary of State's office after the
documents have been notarized by a California notary public and verified by a
county clerk-recorder.
(see our
Questions &
Answers page or our
Apostille page for useful apostille information)
Annual Percentage Rate
(APR)
A required Truth in Lending Act disclosure for consumer loans. It is a
calculation of the cost of credit as a yearly rate, shown as a percentage. It
is typically higher than the interest rate because it incorporates prepaid
finance charges that are not interest.
Authentication
A procedure performed by the California Secretary of State that provides
authentication of public official signatures - including notarizations - on
documents that are to be used outside the United States. The country of
destination determines whether the authentication is to be done as an
apostille or
certification.
Balloon payment
A scheduled payment due at the end of a loan term that is
substantially greater than the regular monthly payments. It is designed to
occur when the regular payments do not pay off all principal and interest owing
(not fully amortizing) on the loan over the term of the loan.
Broker Compensation or
Fee
The amount of money the broker will receive for finding a loan for a
borrower. This amount may be paid by the borrower, by the lender, or shared by
both.
Certified Copy
A duplicate of an original document,
such as a birth certificate, marriage certificate, or divorce
decree, that has been certified as an exact reproduction, usually by the
officer/clerk responsible for issuing or keeping the original. In
California, notaries may only certify copies of power of attorney documents.
Certification
When a notarized document is authenticated by the California Secretary of
State for use outside the United States, the
authentication takes the form of
either an apostille or certification,
depending upon the wishes of the destination country.
Closing
The time when loan and mortgage documents are formally signed and the
loan transaction is completed. Also called loan closing or settlement.
Closing Agent
The person who organizes and is in charge of the loan closing. The
closing agent can explain all documents the borrower must sign. Also called
settlement agent.
Closing Costs
A general term to describe the fees that a borrower will pay at
closing. Also called settlement fees.
Conformed Copy
When carbon copies are made from original documents, the notary is
sometimes asked to conform, rather than notarize, the copies. To conform a
copy, the notary must reaffix his official seal on the copy (carbon usually does
not readily transfer a seal impression) and write "Conformed Copy" prominently
across the copy.
Conforming Loans
Loans which conform to Fannie Mae guidelines. The
conforming loan limit for a single-family mortgage purchased by Fannie Mae is
$417,000. (compare to jumbo loans)
Copy
Certification by Document Custodian
For documents that - by law - cannot
be notarized (including passports and driver's licenses), a California notary
can perform a "copy certification by document custodian". To do this, the
holder of the original document makes a photocopy of the document, and certifies
the copy by means of a written statement. The notary then notarizes the signed,
written statement.
Credit Score
A number intended to show lenders how likely you are to repay a loan;
i.e., whether you are a good or poor credit risk. This score can be an
important factor in determining whether you will get a loan, from whom, and what
interest rate and fees you will be charged for your loan. The score is
generated by a mathematical formula that considers your credit reports and other
variables. It may also be referred to as a FICO (Fair Isaac Company) score,
Beacon score, or some other name; these are companies that create credit scores.
Deed of Trust
In some states, including California, loans are secured by means of a
document called a deed of trust, which serves as a mortgage document. The deed
of trust must be notarized.
Document Preparation Fee
Money you may be charged for the preparation of mortgage loan
documents. This charge will be shown on the HUD-1 Settlement Statement.
Fannie Mae
The Federal National Mortgage
Association (FNMA), a federally-sponsored agency which buys mortgages from
banks, savings and loans, and other lending institutions.
FICO
Credit scores calculated by Fair Isaac Company are often referred to
as FICO. Normally an average of credit scores taken by three national credit
reporting bureaus (Equifax, Experian, and TransUnion).
Finance Charge
A disclosure that appears on the Truth in Lending Act Disclosure
Statement. It is intended to show the cost of your loan as a dollar amount. It
includes: (1) interest that will be charged over the life of the loan; and (2)
some up-front fees (prepaid finance charges). Prepaid finance charges include
such items as mortgage broker fees, lender fees, points, and some closing agent
fees. Any closing fees that are unreasonably high should also be included. You
may also be required to pay other fees that will not be included in the finance
charge.
Fixed Rate Loan
A loan in which the interest rate does not change during the term of
the loan.
Flood Certification Fee
A fee charged to determine if the property lies in a flood zone and
whether flood insurance is required.
Fully Amortizing
This describes a loan in which the balance owed at the scheduled end
of the loan is zero if all regular monthly payments are made as scheduled.
Good Faith Estimate
A document that lists the estimated fees you will have to pay to
obtain the loan. It also identifies who is expected to provide services and
receive fees in connection with your loan, such as credit bureaus, appraisers,
and closing agents.
Government Recording
Fees and Taxes
Fees and taxes required to be paid to the local government where your
mortgage documents are filed.
Grant Deed
A document which transfers ownership of
real property from one owner to another. The grant deed contains an
implied promise that the person transferring the property actually owns the
title and that it is not encumbered in any way, except as described in the deed.
Homeowner's / Hazard
Insurance
Homeowner's or Hazard Insurance is required to protect the mortgage
lender against possible damage to your home. It can also protect the borrower.
A borrower must obtain this insurance and bring proof of its existence to the
loan closing.
HUD
The U.S. Department of Housing and Urban Development
HUD-1
A closing statement (or settlement statement) of all costs and fees
in your closing.
Interest-Only Loan
A loan in which the
borrower pays only the interest that accrues on the loan balance each month.
Because each payment goes toward interest only, the outstanding balance of the
loan does not decline as payments are made.
At the end of the loan term,
the borrower must repay the principal or convert the loan to a conventional
repayment loan.
Introductory Rate
Some loans have a lower introductory interest rate, which remains in
effect for a limited time. At the end of the introductory period, the interest
rate will increase. Also known as a "teaser rate."
Journal of Notarial Acts (also Notary Journal)
A book in which the notary records significant information pertaining
to each notarization, including: date; venue;
description of notarized documents; names, identification, and addresses of all
signers; and more. All persons being notarized must sign the journal;
thumbprints may also be required, depending upon the type of document being
notarized.
Jumbo
Loans
Loans which exceed the Fannie Mae guidelines for loan size and
amount. Jumbo loans may have different guidelines from those of conforming
loans. A jumbo loan is a home loan in which the amount loaned to purchase or
refinance exceeds $417,000. (compare to
conforming loans)
Jurat
Documents requiring a jurat notarization
must be signed in the notary's presence, as indicated by typical jurat wording:
"...subscribed and sworn to before me..." In executing a jurat, a notary
guarantees that the signer personally appeared, was administered an oath or
affirmation by the notary, and signed in the notary's presence. If an oath is
not administered, the notarization may subsequently be voided. Jurats are
typically required for only a few types of documents and notarizations,
including affidavits and depositions.
(compare to acknowledgment)
Lien
A claim (legal interest) against a home. Common types of liens
include a mortgage, tax lien, and judgment lien.
Line of Credit
Also called an "open line of credit" secured on your home. Often
there are no closing costs involved, or the lender offers to pay all closing
costs. Used like a checking account for borrowing an amount up to your credit
limit.
Loan Modification
A loan modification is a modification to
an existing loan made by a lender in response to a borrower's long-term
inability to repay the loan. Loan modifications typically involve a
reduction in the interest rate on the loan, an extension of the length of the
term of the loan, a different type of loan or any combination of the three.
A lender might be open to modifying a loan because the cost of doing so is less
than the cost of default. Not to be confused with a refinance.
Loan Term
Length of time until your loan is fully due and payable.
Mortgage
A promise in which you agree to put up your home as security for a
loan. The mortgage is the instrument that secures the Promissory Note, in which
you promise to repay the loan by a certain date. The mortgage document allows
the lender to force a sale of your home (i.e., foreclosure) if, for example, you
fail to make payments, fail to pay property taxes or insurance, or fail to keep
other promises. In some states, including California, the mortgage document is
called a "deed of trust."
Mortgage Broker
A person or company that obtains a mortgage loan for the borrower
from another lender.
Mortgage Insurance (MI
or PMI)
Insurance that may be required when a loan is greater than 80% of the
value of the home. This insurance protects the lender in the event a borrower
fails to make the loan payments. The borrower ordinarily pays the cost of MI or
PMI, in the form of monthly premiums added to the mortgage payments.
Notary Public
A person commissioned by a state
government to serve the public as an impartial witness with duties specified by
law. The notary has the legal authority to witness the signing of documents and
to administer oaths.
Notary Signing Agent
A notary signing agent is a notary public who also possesses expertise in
the specialty of real estate loan document signings. His knowledge of loan
documents enables him to provide his clients with guidance and assistance in
sorting through and understanding the many types of documents typically included
in loan packages.
Note
A written promise or contract to repay a
debt or loan. The note states the amount and frequency of payments, and is
secured by a deed of trust or mortgage.
Notice of Right to
Cancel
Under federal law, you may be permitted to cancel or "rescind" a
mortgage loan within a specified time (generally three days) after you have
signed loan documents in a refinance or other mortgage loans which do not
involve the initial purchase of a home. The lender is required to give the
borrower: (1) notice in writing of this right to cancel or rescind; and (2) the
deadline to cancel.
Open-End Loan
A loan that permits the borrower to draw money periodically, up to a
pre-determined credit limit. A home equity line of credit (HELOC) is an
open-end loan secured by a home.
Payment Schedule
The information on the Truth in Lending Disclosure Statement shows
the amount of the first loan payment, the amount and number of the regularly
scheduled payments, the amount of the final payment, and when all those payments
are due. The actual payment due may be greater for a number of reasons,
including taxes and insurance. If the loan has an "adjustable rate," the actual
payments will differ from the payment schedule.
Points
A fee charged by the lender as additional compensation for making the
loan. One "point" is equal to 1% of the principal amount of the loan.
Prepayment Penalty
The charge that can be imposed if you pay off your loan before
maturity. The Truth in Lending Disclosure Statement will show whether a loan
has a prepayment penalty.
Prime Loan
A loan offered to borrowers with better credit history (also called
"A" loans). Prime loans generally are priced lower, have lower interest rates,
and cost the borrower less.
Promissory Note
A legal contract in which the borrower promises to pay back a loan.
The promissory note sets forth the terms and conditions that apply to the loan
repayment, such as interest rate, when payments are due, where payments are
made, what happens if payments are not made, etc.
Quitclaim Deed
A document which transfers all or part of
an interest in real property from one party to another. When a quitclaim
deed is used, the person to whom the interest is transferred accepts all risk of
undisclosed claims and defects.
Rate Lock
A written agreement between the borrower and the lender or broker that as
long as the loan is closed within a certain period of time (e.g., 30 days), the
interest rate on the loan will be set (locked) at an agreed-upon rate.
Recording Fees
Fees charged by the local government to record loan documents (for
example, the deed of trust). These fees will be charged to the borrower and
shown on the Settlement Statement (HUD-1).
Refinance
Paying off an existing loan with the
proceeds from a new loan, especially at a lower rate of interest, using the same
property as security. Not to be confused with a loan modification.
Unlike an ordinary mortgage, in which the borrower
makes payments to the lender, a reverse mortgage involves payments by the lender
to the borrower. It is an arrangement whereby homeowners get cash (usually in
the form of monthly payments or a lump sum) in return for a mortgage on their
home, which is used as security against the loan. This is a strategy sometimes
used by homeowners who want to supplement their income, using their home's
equity as collateral.
Subprime Loans
These loans are priced higher than prime loans (often much higher).
Loans to borrowers whose credit is less than perfect are almost always subprime
loans. There are also other circumstances that lead to subprime loans,
including high outstanding debt, unproven income, etc. Even borrowers with good
credit may receive subprime loans for a variety of reasons, including fraud and
discrimination.
Survey
A drawing or map showing the precise legal boundaries of a property
and other physical features, prepared by a registered land surveyor.
Title Insurance
Transfer Tax or Charge
A government tax or charge that is usually based on a percentage of
the property value or loan amount and imposed by state or local law. Many
states do not require this charge for a refinance loan, but almost all require
it for a home purchase. Transfer tax is shown on the Settlement Statement
(HUD-1).
Truth in Lending Act (TILA)
A federal law designed to protect borrowers and to give them enough
information to comparison-shop for loans. TILA requires certain disclosures
about the loan and when they must be given to the borrower. TILA also provides
additional protections and prohibitions.
Truth in Lending
Disclosure Statement
A document required by federal law for all consumer loans. It
provides key information to enable borrowers to shop around and compare loan
terms from various lenders.
Underwriting Fee
A fee charged by the lender to evaluate whether the borrower
qualifies for a mortgage loan. An underwriting fee may be charged to the
borrower and shown on the Settlement Statement (HUD-1).
Upfront Costs
Costs or fees charged to the borrower at or before closing of the
mortgage loan, such as loan application fees, appraisal fees, points, broker
fees, credit report fees, real estate taxes, etc. Upfront costs can be paid in
several ways: (1) they can be paid by the borrower in cash; or (2) they can be
added to the loan amount and financed over the life of the mortgage.
Venue
The physical location or address where a notarization is
performed. The venue is recorded in the notary's journal. (see
journal of notarial acts)
Yield Spread Premium (YSP)
A payment made by a lender to a mortgage broker in connection with a
borrower's mortgage transaction. It is shown on the Settlement Statement
(HUD-1), but often in a way that is difficult to understand. For example, a
$1,000 yield spread premium may be shown as "YSP POC 1000." Borrowers are often
unaware that the YSP payment is being made. The payment of a YSP by a lender
affects the interest rate charged to the borrower.
For more information or to schedule an appointment, please call 510-681-0045 or email info@sundancenotary.com
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