PURCHASE AND FIRST MORTGAGE SETTLEMENTS ⁄ CLOSINGS

LET HOME TITLE HELP TAKE AWAY THE STRESS AND CONFUSION WITH REGARD TO YOUR PURCHASE AND MORTGAGE PROCESS!!!

THE PURPOSE OF THIS MEMORANDUM IS TO PROVIDE A SUMMARY OF THE LOAN APPROVAL PROCESS AND THE CONTENTS OF THE DOCUMENTS THAT WILL BE PRESENTED TO YOU AT THE SETTLEMENT TABLE. THIS MEMORANDUM IS NOT INTENDED TO BE LEGAL ADVICE BUT RATHER AN ATTEMPT TO EXPLAIN THE PROCESS. ANY LEGAL ADVICE SHOULD BE SOUGHT BY YOU FROM YOUR ATTORNEY.

OVERVIEW

When you place a Mortgage ⁄ Deed of Trust on a property to purchase a home, that transaction is considered a purchase money loan.

In order for your lender to approve your loan request, many factors are considered:

Income
Debts
Other monetary obligations
Appraised value of the property
Verification of employment, bank accounts.
Acceptable credit report

SCHEDULING OF SETTLEMENT

Once your loan has been approved, a representative of either the Builder, Lender or Home Title Company, Inc. ("Title Company") will contact you to schedule a date, time and location to perform settlement. The actual settlement will be conducted by a licensed settlement agent of the Title Company. All best efforts will be made to schedule settlement at your convenience.

REQUIREMENTS

In addition, as part of the Lender's closing instructions, you may be asked to bring certain documentation to settlement ⁄ closing, such as the following:

Proof of Homeowners Insurance coverage
Credit card monthly statements
Personal ID
Current Pay stubs
W2's

(It is best to contact your loan officer to find out exactly what you will need!!!)

SETTLEMENT DOCUMENTS

There are several documents that will be presented and signed at settlement. A few of those documents are outlined below. However, please note most explanations will be easier to understand once the final document has been prepared and presented at closing.

HUD-I SETTLEMENT STATEMENT

This is the composite of all the fees and charges in the transaction. It is a two-page form that starts on the second page.

Second page, the left-side column marked "Paid from borrowers funds at settlement" are your costs. Some costs will appear under this column and will be marked "POC" (definition Paid Out of Closing), these are costs which you have already paid or have been paid on your behalf.

The first section (TOTAL SALES ⁄ BROKER'S COMMISSION) applies to the Seller ⁄ Builder only, the second section. (ITEMS PAYABLE IN CONNECTION WITH LOAN - Lines 800-801) are lender fees (including points, appraisal fees, credit report fees, etc.). The third and fourth sections (ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE AND RESERVES DEPOSITED WITH LENDER - Lines 900-1008) include interest to be collected on the new loan from the date of settlement ⁄ closing to the end of the current month as well as escrows collected by the Lender to be paid on your behalf when the bills become due. These escrow funds are used to pay annual real estate taxes, homeowners's insurance, etc. The fifth section (TITLE CHARGES - Lines 1100-1113) are the Title Company charges, which include settlement fee, title search, owners and lenders title insurance, federal express, copies and judgment search charges. The sixth section (GOVERNMENT RECORDING AND TRANSFER CHARGES- Lines 1200-1205) are government fees to record the new Deed, Mortgage ⁄ Deed of Trust, and to pay recordation and transfer taxes.

The seventh section (ADDITIONAL SETTLEMENT CHARGES-Lines 1301-1305) are used for Homeowner's Association fees, Condominium Dues and Capital Contribution charges as set out in your Contract to purchase.

The total from this page Line 1400 will be carried forward to the first page and shown on Line 103.

First page summary of Borrower's Transaction (GROSS AMOUNT DUE FROM BORROWER - Lines 100-120). Line 101 will reflect the Contract Purchase Price of the home. Line 103 will be carried over from Line 1400. Line 107 is an adjustment for real property taxes. If the Builder has paid the real property taxes, the Borrower ⁄ Purchaser must reimburse the Builder from the time of settlement to the end of the fiscal tax year (July 1 through June 30). Typically, the cost of the location drawing (paid in advance by Builder) as well as additional options will be shown in this area. The total of Line 120 will be carried to Line 301 at the bottom.

(AMOUNTS TO BE PAID BY OR ON BEHALF OF BORROWER - Lines 200- 220). Line 201 will reflect the Contract of Sale earnest money deposit which Borrower ⁄ Purchaser paid up-front. Line 202 will show the loan amount which you have borrowed to pay for the house. Lines 204-219 will reflect adjustments in Borrower ⁄ Purchaser's favor such as closing cost credits, water adjustments or real estate tax adjustments. The total of Line 220 is carried to Line 302 below and deducted from Line 301. If there is a balance due from Borrower ⁄ Purchaser, you must wire funds to Home Title Company, Inc.'s Settlement ⁄ Escrow Account prior to or on the day of closing. If you have received a proceeds check from your previous settlement, please contact Home Title Company, Inc. immediately and we will advise how to proceed.

RESIDENTIAL LOAN APPLICATION

This is the typed composite of information that you provided to your loan officer at the beginning of the process. It reflects credit information as of the time of application.

TRUTH IN LENDING

This document is intended to show the finance charges on your loan.

The main points are as follows:

Annual Percentage Rate: the Lender computes this over the term of the loan and deducts out any points and fees you are paying. This is NOT THE NOTE RATE on which you repay your loan. You pay on the note rate.
Amount Financed: this is the loan amount less any fees paid by you.
Total Amount to be Re-paid to the lender if the loan is paid to maturity. If you pay off the loan earlier, you will not pay all of this.

In addition, the form addresses that you will be granting a Mortgage ⁄ Deed of Trust on the property. The document will also state that you do not have to pay a penalty for early payoff. There will be a late fee imposed for late payment, and it will also state that your loan is assumable or not assumable. In other words, when you sell your home, you must payoff this mortgage, unless it is an FHA or V A loan, which are assumable.

NOTE

This is the obligation to repay the debt. Included are the loan amount, interest rate, the payment amount, the date payments are due, and the late charge. Usually, payments are due on the first of each month, starting on the first day of the first full month following settlement. (Example: April 15 Settlement First Payment Due June 1).

DEED OF TRUST ⁄ MORTGAGE

From a borrower's perspective, a Deed of Trust ⁄ Mortgage are virtually the same. Which form is used depends on the customs in your area. This is security for the loan and creates a lien on the house. According to this document, you agree to repay the loan in accordance with the terms of the note. The lender is allowed to either escrow for payment of taxes and insurance annually or request proof that they have been paid by you. On most first Mortgages, the lender will require the escrowing of funds. In addition, this document advises you of the lender's right to foreclose in the event of default, the notice required to be given to you, and the various costs of foreclosure that would be charged.

SURVEY

When you purchase your home, unless it is a condominium, the Title Company or Builder will procure on your behalf and expense the House Location Drawing or Location Survey. This drawing shows the dimension of your land, and location of your home, outbuildings, porches, patios, fences, etc. and is generally required by the Lender as a condition of the Loan.

If you wish to build a fence or improve the property, you may want to purchase a boundary survey. Please call our office to discuss.

ESCROW DISCLOSURE ⁄ AGGREGATE ESCROW ADJUSTMENTS

This document shows an estimate of how much money will be deposited over the next 12 months of your loan into your escrow account and will also show when taxes, homeowner's insurance, etc. will be paid on your behalf. If there is an excess, your payments will be lowered or you will receive a refund.

BORROWER'S AFFIDAVIT

You will be presented with a document to sign that states that you have no other liens, mortgages, judgments, income tax liens, etc., other than shown on the HUD-l Settlement Statement. This addresses any liens, etc. that may not yet appear of record.

CORRECTION AGREEMENTS ⁄ CORRECTION AGREEMENT - LIMITED POWER OF ATTORNEY

This states that if there are clerical or typographical errors on the loan documents you will cooperate and re-sign these documents, if necessary. If you are not available, you authorize the lender and ⁄ or title company to initial these changes on your behalf. Copies will be forwarded to you in the event corrections are made.

MONTHLY PAYMENT AND SERVICING DISCLOSURE FORMS

These forms tell you the amount of your monthly payment, when and where to make your first payment, if you do not receive a bill or coupon book. However, this information is normally sent to you well before your first payment is due.

The servicing disclosure notifies you that the lender has the right to sell your loan to another lender. The lender cannot change the terms of the loan. You will make the same Mortgage payment, but to another company. If this happens, you will be notified in advance.

In addition, there are forms authorizing the title company to disburse your funds, and directing us how to send them to you.

W-9 TAX FORMS AND TAX AUTHORIZATION

A W-9 form from each borrower will be signed at settlement. Either complete your social security number, or verify that it appears correctly. This form generates the interest statement you receive in January, which in turn, you use for your income tax deductions. There are also other forms authorizing the lender to procure filed copies of any income tax returns for the prior three years directly from the IRS, at the Lender's expense.

NAME AFFIDAVITS

These forms are signed to tie in any name variations on your loan, such as title documents, employment verifications, bank accounts, credit cards, etc.

NOTICES

This advises you of the roles played by the lender and title company in your mortgage transaction. It also discloses the fees charged for these services. These charges all appeared on the HUD-I Settlement Statement.

MISCELLANEOUS FORMS

Owner Occupancy: you intend to occupy the property as your primary residence. This does not mean you cannot sell or rent the property in the future.
An affidavit that you are still employed in a comparable position as to when you applied for the loan. You have not changed your marital status, nor incurred significantly more debt since application. You also authorize the lender to procure employment, bank accounts, and other verifications that were necessary.
Equal Opportunity and Non Discrimination Disclosures.
Release letter. If necessary, you will assist the title company in obtaining a release ⁄ satisfaction of the Mortgage being paid off from the settlement proceeds.
Flood Insurance ⁄ Flood Authorization: a review of flood maps determines if flood insurance coverage will be a requirement of your loan.
Maryland Withholding Affidavit. This form states whether the Seller is a Maryland resident or not. If the seller is not a Maryland resident, a tax will be imposed by the State of Maryland and collected at closing.

If you have any questions about the documents or this explanation, please feel free to contact us, during business hours, toll free:

Home Title Company, Inc.,
Local (410) 727-2878
Out of State 1-800-265-2261
Fax (410)-659-9408

HOME TITLE COMPANY, INC. WILL DO EVERYTHING IT CAN TO MAKE YOUR PURCHASE AND SETTLEMENT A PLEASANT EXPERIENCE!