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Glossary of Notary and Loan Terminology
(notary terms are in red, loan terms are in green)

Acknowledgment
Documents requiring an acknowledgment notarization do not have to be signed in the notary's presence.  However, the signer must appear before the notary at the time of the actual notarization to acknowledge that he or she freely signed for the purposes stated in the document.  An acknowledgment certificate (completed by the notary) indicates that the signer personally appeared before the notary, was properly identified by the notary, and acknowledged to the notary that the document was freely signed.  Most notarizations are acknowledgments.  (compare to jurat)

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 "index" options.

Affidavit
A written statement, signed in the presence of a notary, in which the signer swears under oath (see jurat) that the information provided is true and correct to the best of the signer's knowledge.

Amortize
To pay off a debt in installments that include both principal and interest.

Amount Financed
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 advance).

Apostille
A document required by foreign countries attesting to the validity of a notarized signature on a U.S. document.  In California, apostilles are performed by the California Secretary of State's office after the documents have been notarized by a California notary public.  (see my apostille page)

Annual Percentage Rate (APR)
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 not interest.

Authentication
A procedure performed by the California Secretary of State that provides authentication of public official signatures - including notarizations - 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 certification.

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.

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 by both.

Certification
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.

Closing
The time when loan and mortgage documents are formally signed and the loan transaction is completed.  Also called settlement.

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.

Closing Costs
A general term to describe the fees that a borrower will pay at closing.  Also called settlement fees.

Conformed Copy
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 reaffix his official seal on the copy (carbon usually does not readily transfer a seal impression) and write "Conformed Copy" prominently across the copy.

Conforming Loans
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
For documents 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 statement.

Credit Score
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 credit scores.

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.

Fannie Mae
The Federal National Mortgage Association (FNMA), a federally-sponsored agency which buys mortgages from banks, savings and loans, and other lending institutions.

FICO
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).

Finance Charge
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.

Fully Amortizing
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.

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.

HUD
The U.S. Department of Housing and Urban Development.

HUD-1
A closing statement (or settlement statement) of all costs and fees in your closing.

Interest-Only Loan
A 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.

Introductory Rate
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."

Journal of Notarial Acts (also Notary Journal)
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.

Jumbo Loans
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)

Jurat
Documents requiring a jurat notarization must be signed in the notary's presence, as indicated by typical jurat wording: "...subscribed and sworn to before me..."  In executing a jurat, a notary guarantees that the signer personally appeared, was administered an oath or affirmation by the notary, and signed in the notary's presence.  If an oath is not administered, the notarization can subsequently be voided.  Jurats are typically required for only a few types of documents and notarizations, including affidavits and depositions.  (compare to acknowledgment)

Lien
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.

Loan Term
Length of time until your loan is fully due and payable.

Mortgage
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."

Mortgage Broker
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.

Notary Public
A person 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 most loan packages.

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 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.

Open-End Loan
A loan that permits the borrower to draw money from time to time up to a credit limit.  A home equity line of credit (HELOC) is an open-end loan secured by a home.

Payment Schedule
This 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.

Points
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.

Prepayment Penalty
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.

Prime Loan
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.

Promissory Note
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.

Rate Lock
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.

Recording Fees
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 (HUD-1).

Reverse Mortgage
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.

Subprime Loans
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 and discrimination.

Survey
A drawing or map showing the precise legal boundaries of a property and other physical features, prepared by a registered land surveyor.

Title Insurance
Insurance 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 prohibitions.

Truth in Lending Disclosure 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.

Underwriting Fee
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 (HUD-1).

Upfront Costs
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.

Venue
The physical location or address where a notarization is performed is referred to as the venue.  The venue is recorded in the notary's journal (see journal of notarial acts).

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.

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Mobile Notary Public and Certified Notary Signing Agent
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(for areas not listed, please inquire)

Joel Klutch, California Mobile Notary Public Mobile Notary Public and Certified Notary Signing Agent for the Berkeley / Oakland / San Francisco California Bay Area call 510-681-0045

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