Northstar Notary

Frequently Asked Questions

Q: What is a Rescission period?

A: The three-day time frame the Borrower has to cancel the loan transaction without penalty. The rescission period starts at midnight the date following the signing, and concludes at midnight of the third day after. When calculating the expiration date, remember: Do not count the transaction date (date of Borrowers signature documents), do not count Sunday, and do not count legal holidays (New Year's Day, Martin Luther King Day, President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving, and Christmas). Please note that not every transaction is subject to a rescission period.

Q: What is APR?

A: The yearly cost of a mortgage, including interest, mortgage insurance, and the origination fee, shown as a percentage.

Q: What is the Interest Rate?

A: Interest per year divided by principle amount, shown as a percentage.

Q: What is an Investment Property?

A: A property that is not occupied by the owner. In instances where the owners are taking out a loan that is being secured by an investment property, the Borrowers are not offered a right to rescind.

Q: What is the HUD-1 Statement/Settlement Statement?

A: This document is generated at the close of escrow and provides a detail of all the costs and expenses that are associated with the transaction. Included in the HUO-l are: the settlement charges to the Borrower (line 103), the amount of the loan to be paid off (line 104), the gross amount due from the Borrower (line 120), the principal amount of the new loan (line 202) and any other deposits or fees. At the bottom of the first page it subtracts line 220 from line 120 to see if the Borrower either needs to pay additional funds or if funds are owed to the Borrower. An "x" will be placed on line 303, which will let the Notary know which one it is. If the Borrower is required to provide additional funds, the Notary should attempt to collect those funds. If the Borrower does not have a check (cashiers check, unless otherwise specified by escrow), alert the Borrower that the funds should be submitted to escrow as soon as possible. All of the settlement charges (line 103) are itemized and men totaled on fine second page. A Notary can explain what me charges are for but cannot explain the reason for the amount of each charge. Generally, if no Addendum to the HUD-1 (see below) is attached, there will be a place (generally provided by escrow) on each page of the HUD-1 for the Borrower's signature.

Q: What is the Addendum to HUD-1 Settlement Statement?

A: This is an additional page that may be attached, and verifies that the Borrowers have read and understand the HUD-1. This document will require the Borrower's signature.

Q: What are the Closing Instructions?

A: This document contains instructions from the Lender specifying certain loan requirements and conditions. This rarely requires a signature or initials, but let the Borrowers review this anyway.

Q: What is the Deed of Trust?

A: This document secures the subject property as collateral in consideration for the loan, and is recorded with the county. Have the Borrower check that the loan amount is correct and that the length of the loan is accurate. Since this document is recorded, as long as there are no specific restrictions in your state and/or county have the Borrowers) initial every page. The Deed of Trust is a standard form; therefore the terms and paragraphs in the body of the document may, or may not apply to the loan. Have the Borrower sign their name exactly as it is printed in black ink (unless another color is specified). This document will need notarization.

Q: What items can I find on the Note?

A: The Note is the loan agreement, and it outlines the terms of the loan. The Note includes:

Q: What are the Various Riders for?

A: At the end of the Deed of Trust, there may be a list of Riders (additions or amendments) to the document. If one or more of the boxes are checked, then the appropriate Rider will be attached. Examples include the Condominium Rider for condominiums, 1-4 Family Rider in multi-family dwellings, and Balloon Rider where a "balloon payment" is part of the loan. These will need signatures, but not notarization since the Riders are part of the Deed of Trust.

Q: What is Subordination Agreement?

A: This document alters the priority of existing liens against the property, such as an existing HELOC or second mortgage, ensuring that the new Deed of Trust will be placed in first position on the title of the property. There may be multiple subordination agreements. This document requires notarization. This document will usually have notarized signatures from the entity that is agreeing to the terms of the subordination agreement. Notarization of the Borrower(s) signature must also be completed on the agreement.

Q: What is the Mortgagor's Affidavit?

A: This document is used by the Federal Housing Administration to insure the loan, or by the Veterans Administration to guarantee the loan, or by a Private Mortgage Insurance Company to insure the loan. This document also verifies or not the Borrower intends to occupy the property as a primary residence. It also determines if a property is located in a Special Flood Hazard Area. This document will need to be signed and notarized.

Q: What is on the Truth in Lending Disclosure Statement?

A: The Truth in Lending Disclosure Statement is made up of:

This document also stipulates if there is a pre-payment penalty associated with the loan. The Annual Percentage Rate is a separate figure from the Interest Rate and is usually higher. If the Borrowers are confused about this, have them call their lender to explain.

Q: What is the Notice of Right to Cancel?

A: If the loan allows for the Borrower to cancel the loan that is being signed within three days (excluding Sunday), this notice will be included (please see the Important Terms section for more detail on the Rescission Period). National holidays are excluded from the calculation of three business days. Be careful to monitor where the Borrower signs this document. The Borrower should usually sign on the line that says they have received this document (not the line that states they wish to cancel). There will usually be multiple originals of this document. Have them sign all originals.

Q: Why is there an Affiliated Business Arrangement Disclosure?

A: This disclosure is provided to the Borrower because they may have inquired about a lender-affiliated mortgage or escrow company. The lender is stating that any referrals were only suggestions and that the Borrower was free to choose any company that he/she desired.

Q: What is the Close Application (Payoff Letter)?

A: This document authorizes the lender to payoff the old loan with the funds from the new (refinance) loan.

Q: What is the payoff statement?

A: It itemizes the old loan with other fees that may include: Prepayment interest, Optional insurance, Fees required for payoff, Funds to be Credited, Funds to be retained.
This tells the Borrower how the amount of the payoff of the old loan was reached. Generally, the total payoff amount on this statement will match the payoff amount listed on the HUD-1 statement.

Q: What is the Statement of information?

A: This document is to be completed entirely by the Borrowers) and signed. Since this takes some time, it is recommended that this document be saved until the end so that you, the Notary, can do your necessary paperwork (i.e., filling out the notary journal, reviewing the signing documents for errors, etc).