QUESTION: It seems as though there will be a lot of documents for me to sign. I understand that all of the documents are important. However, are there any specific documents to which I should pay special attention?

ANSWER: There are, in fact, many documents which you will sign at settlement. Many are self-explanatory, such as declarations that you intend on occupying the property, that you have not given any false statements to the lender, or that your correct mailing address will be the property address. You should understand each of these documents before signing them.

One of the most important documents you will review and sign is the HUD-1 Settlement Statement. This document sets forth all of the costs and expenses of settlement, as well as the adjustments between the Buyer and Seller.

In addition, there are certain loan documents which are of paramount importance. You will be signing a final "Truth-in-Lending Statement." You should note that the Annual Percentage Rate may not equal your Note rate. This is because the Annual Percentage Rate reflects the lender's true yield or actual earnings when you figure in not only the interest that you pay, but certain other expenses and fees, such as the points. Interestingly, if you look at the Total of Payments, you will see a fairly accurate estimate of what you can expect to pay over the full term of the loan. The document will also state whether or not any late charge will be assessed for a late payment. It should also specify whether any penalty exists for pre-payment of your loan.

You will also sign a Promissory Note, which is your promise to repay the lender. You should review your Note in order to determine that the interest rate, loan amount, and term of the loan are correct. Additionally, the Note should state whether there exists a penalty for pre-payment and that the late charge should not exceed five percent (5%) of your overdue payment of principal and interest. Finally, the Note may state that the loan is not assumable. This means that if you sell or transfer any interest in the property, the new purchaser will not be allowed to take over the payments on your loan. Instead, the Buyers will be required to obtain their own loan.

Another document which you will sign is the Deed of Trust. This is the document in which you pledge the house as collateral for repayment of the loan. In the event that you fail to make the payments and the lender properly notifies you of this default, then the lender will be authorized to have the house sold at public auction or foreclosure.

The settlement attorney will review these documents to determine that they are properly drafted and will explain them to you at settlement. You will also have the opportunity to review them at settlement. After you have reviewed these documents at settlement, you will sign the loan papers and receive copies at closing. You should always keep a separate file for your settlement papers.

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