Mortgage Closing - Understanding What You're Signing

Millions of people recently refinanced their home. During this refi boom, unscrupulous people entered the business and put many of these borrowers into bad loans. In many cases people didnt know what they were signing, and got stuck. Below are a few things that you should pay special attention to.

Your mortgage note is the legally binding document that describes the details of the loan. The note will carry what are called riders. An example of a rider is an adjustable rate rider. This explains that your loan has an adjustable rate and should also tell you how long the rate is fixed for, as well as the margins and caps (how much it can adjust).

The truth in lending statement (TIL) will tell you what your interest rate is, and APR. The APR is the true cost of the loan; it is the interest rate plus any fees associated with the loan. The TIL will also tell you the term of the loan (length of time to repay), the amount of your payments, and when your payments begin.

You will also see a HUD-1 statement. The HUD will break down all of the settlement charges associated with your loan. It will also detail the total loan amount, and the amount of cash you owe or are receiving.

You should have your loan officer show you the document that describes the prepayment penalty (PPP) or lack thereof. There will be a disclosure that tells you how the PPP is charged and under what conditions.

These are the basic documents that you want to review carefully. You certainly want to understand everything that you sign, but these listed are the main documents that describe your loan.

If you see the terms MTA Option, Option ARM, or negative amortization anywhere on any document and you dont understand what they mean, you should have them thoroughly explained. These programs can be dangerous. In short, you can make monthly payments only to see your balance increase with these loans.

The biggest thing you can do to protect yourself is ask questions! If you dont understand something ask! There are no stupid questions, and you will be the one hurt by a bad loan. Not understanding what you are signing is no excuse for getting stuck with a damaging loan program. The responsibility is yours to ask for explanations of things you dont understand until you feel comfortable.

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Drew Tyler is an experienced and successful mortgage professional. To gain more insight into the mortgage industry, and make yourself a more educated borrower, please visit www.competingloans.net.

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