are some of the more commonly-used words and terms you may encounter
when dealing with real estate loan documents and notarization. I hope
you find this information helpful.
Frequently Asked Questions About Notary Items
Please note that the information given on this site should not be interpreted as legal advice. Legal advice may only be given
by an attorney.
Acknowledgment What is an Acknowledgment?
An Acknowledgment is a certificate completed by the notary according
to Civil Code section 1189, wherein: (a). The signer personallyappeared before the notary on the date and in
indicated and acknowledged executing the document being Acknowledged, (b). The notary signed
and affixed his/her seal on the Acknowledgment, and (e). The notary properly
identified the signer. The wording
of the Acknowledgment must read:
State of California
County of ______
On_____before me (Name and title of officer
executing the Acknowledgment), personally appeared _____________
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the
acted, executed the instrument.
under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is
true and correct.
WITNESS my hand and official seal.
What is an 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
What is an 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)
What does it mean to Amortize a loan?
To pay off a debt in installments that include both principal and interest.
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
What does Apostillemean? 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
Why is the Annual Percentage Rate (APR) typically higher?
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
What does Authentication mean?
A procedure performed by the California
Secretary of State that provides authentication of public official
signatures - including notarization(s) - 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
What is a 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.
Who pays the 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.
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.
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.
What determines the Closing date?
The time when loan and mortgage
documents are formally signed and the loan transaction is completed.
Also called loan closing or settlement.
Who is the 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.
What determines Closing Costs?
A general term to describe the fees that a borrower will pay at closing. Also called settlement fees.
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 re-affix his
official seal on the copy (carbon usually does not readily transfer a
seal impression) and write "Conformed Copy" prominently across the copy.
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
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
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
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.
National Mortgage Association (FNMA), a federally-sponsored agency which
buys mortgages from banks, savings and loans, and other lending
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).
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.
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.
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.
The U.S. Department of Housing and Urban Development.
A closing statement (or settlement statement) of all costs and fees in your closing.
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.
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."
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.
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)
What is a Jurat?
A Jurat is a certificate completed by the notary according to Goverment Code Section 8202,
wherein: (a). The signer personallyappeared before the notary on the date and in the county
(b). The signer signed the document in front of the notary, (c). The notary
administered the oath or affirmation,
(d). The notary signed and affixed his/her
seal on the Jurat, and(e). The notary properly identified the signer. The
wording of the
jurat must read:
State of California
County of ______
Subscribed and sworn to (or affirmed) before me on this____ day of ____, 20__. by ___________, proved
to to me
on the basis of satisfactory evidence
to be the person(s) who appeared before me.
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.
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.
Length of time until your loan is fully due and payable.
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."
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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
A drawing or map showing the precise
legal boundaries of a property and other physical features, prepared by a
registered land surveyor.
that protects both the lender and the borrower against loss resulting
from defects in the title or claims against a property that were not
discovered in the title search.
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
Truth in Lending 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.
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
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.
The physical location or address where a notarization is performed. The venue is recorded in the notary's journal.
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.