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Route to the New Home: Follow the Paper Trail : Documents: The maze of paper work that greets home buyers in escrow is mostly in hands of people you never meet.

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<i> Heyes is a Times copy editor. </i>

You have found a home to buy. Your offer has been accepted. You have managed to read, understand and deal with the paper work involved in committing yourself to a piece of real estate.

Don’t breathe that sigh of relief yet. There’s more.

Now you have to get the money to pay for your home, and you have to make it through escrow. Financing requires organization and work on your part. Escrow paper work, though very important to you, is mostly in the hands of people you will never meet.

The paper work varies from lender to lender. But you will probably see some version of these basics for a single owner-occupied property, as outlined by George A. Matthews, vice president and area loan manager of Great Western Bank.

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Residential Loan Application. This is the first form the borrower will see, often accompanied by the Loan Disclosure (see below). The questions here are straightforward inquiries about the type of loan you are applying for, the property you want to buy and you. It asks about income, assets, debts and where your down payment will come from.

Now suppose, as is often the case for first-time buyers, the down payment is borrowed from parents, with the understanding that it will be repaid when the house is eventually sold. Great Western requires that a “gift letter” be in the borrower’s file, a statement from the parents that the money is a gift. Each lender handles the gift situation differently. Some lenders require that half the down come from your own resources. How carefully all this information is verified also varies. The lender will tell you about how much insurance coverage you must have to get your loan.

Federal rules require that you be given a consumer handbook that explains in plain language how mortgage loans work and translates often-bewildering “lenderese” terms. An approval/denial decision must be made within 30 days of the lender having the completed application in hand. But lenders have different definitions of what constitutes a “completed application.”

Statement of Assets and Liabilities. A supplement to the application, more space to summarize what you own and what you owe.

Authorization to Disclose. A catchall permission for the lender to check into your credit, employment, mortgages and deposits. This covers inquiries you have not specifically authorized anywhere else.

Loan Disclosure. Required by the Office of Thrift Supervision (formerly the Federal Home Loan Bank Board) for owner-occupied homes, whether the loan is adjustable or fixed rate. It gives the specifics of loan terms without giving actual numbers: It explains limits on adjustments to payments and the interest rate, whether the loan is assumable, if it is due on sale, whether it involves negative amortization, how the impound account, if any, is set up to pay taxes and insurance.

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Read this one carefully and be sure you understand it.

Flood Insurance Notice/Acknowledgement. Required by the Federal Emergency Management Agency--if the home you are buying is in a flood plain and you want to be eligible for federal relief in case of a disastrous flood. This is sent to you, at the latest, when notice of loan approval is sent.

Fire insurance, incidentally, is always required by a lender; earthquake insurance is not. A lender may also insist on sinkhole, mudslide, demolition or other types of insurance, depending on the type and location of the property.

Federal Truth-in-Lending Disclosure Statement. The Office of Thrift Supervision requires that this be sent to you within three working days after you begin the application process--thus, it is sometimes referred to as a “three-day.”

It tells you the relevant numbers: interest rate, how much you are borrowing, how much you will have paid at the end of 30 years, your payment schedule, late-payment charges, prepayment penalty, if any.

The three-day version is an estimate, for your information. Before the close of escrow, you get a similar form with firm numbers (except for long-term costs, which can’t be predicted with certainty for an ARM); this latter one you sign.

Good Faith Estimate of Settlement Charges. Another “three-day,” required by the federal Real Estate Settlement Procedures Act of 1974 (RESPA). This lets you know where the money you borrow is going: to you, the seller, the property inspector, the appraiser, the escrow company, the notary, the title insurance company, public agencies, the pest inspector, anyone holding claims against the property.

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This document itemizes your “prepaid finance charge,” which includes the loan origination fee, loan discount (or points), credit check fee, prepaid interest, mortgage insurance fees. (These terms, by the way, are explained in the Settlement Costs pamphlet; see below.)

And--hang on--you may yet have to pay more than is listed here.

Settlement Costs Booklet. One more “three-day,” required under RESPA and produced by the Department of Housing and Urban Development. This pamphlet explains in plain language the home-buying process and many of the terms you will see on your loan documents. Even with its tiny green type, it is well worth careful reading. Worksheets are included to help you shop for services.

Itemization of Amount Financed. The final version of the Good Faith Estimate. By signing it, you are acknowledging that you’ve read it and that everything is as you understood it would be. Review it carefully before you sign.

Loan Commitment. The lender’s notice to you that you got the money. Practice varies among lenders; Great Western’s letter reviews the numbers you have seen on other documents and summarizes features such as negative amortization, assumability, interest rate limits.

Promissory Note. This is your IOU for the loan. You’ve almost made it now: This is one of the last loan documents you see. The lender returns it to you when your loan is paid off. It may go by other names, usually involving the word note.

Once again, this document reviews your interest rate, payments, limits on interest or payment adjustments, and how often adjustments are made. Make sure all these numbers jibe with your understanding of what they should be. Once you sign this, you are committed to the terms of the loan.

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Deed of Trust. With this, you pledge your home as security for the money you have borrowed. It means the lender could end up owning the property if you default on your loan. You keep the Grant Deed, which is the actual proof of ownership of your home. The lender holds onto the Deed of Trust. Signatures on this must be notarized, since this is being recorded with the County Recorder. By the time you see this one, you may already feel as if you have signed your life away. There should be no surprises in this document.

Settlement Statement. An account of where everyone’s money has gone, to the penny. This serves as a checklist for the escrow officer, who completes the two-page form, required under RESPA. Items covered include sales commissions, loan fees, insurance fees, taxes, title charges, government recording and transfer charges, and additional charges such as survey and pest inspection fees. HUD’s Settlement Costs booklet explains the terms here, which by this point you can probably recite in your fitful sleep.

“Riders” to loan documents. A rider to the Promissory Note, for instance, might predict your interest rate when the first adjustment occurs on an adjustable-rate loan.

At the eye of the paper hurricane, with documents blowing in from all directions, sits the escrow officer. This person must make sure all the money and all the papers land in the right hands, that everything is signed and recorded, and that it is all legit.

Here are the things the officer keeps track of during the often-mysterious process of escrow, as explained by Billie Sandlin of Integrity Escrow, president of the California Escrow Assn.

Preliminary title search, to determine the condition of title to the property. The escrow officer tells the title company to open the search, which involves checking County Recorder’s records for any taxes, liens or judgments against the property or easements; checking court records for judgments against the owner; finding out how title is held, whether the owner has the right to sell the property and who must sign away any claims on it.

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All claims on the property usually have to be cleared before it can be legally transferred to the buyer. The escrow company asks the seller’s lender for a Beneficiary’s Demand for payment, that is, what the lender needs to clear its claim on the property.

Beneficiary’s statement. If the buyer is assuming the seller’s loan, this tells the condition of the loan, monthly payment, balance due, interest rate, charges of any kind and conditions for assumption of loan. That is, everything about the loan that a new buyer might want to know.

If payments are overdue, the seller usually has to make them before the sale goes through.

Lender’s requirements. Before a new loan can be made, the lender will have checked the buyer’s credit and appraised the property already. It may also require a title company inspection of property, copies of the escrow instructions, termite report and hazard insurance. The escrow company tells the buyer’s insurance agent how the policy must read to meet the lender’s requirements.

The Deed of Trust and Promissory Note will go to the escrow office, usually the place they are signed. The money will go to the title company, which pays off all loans of record and sends the rest of the money to the escrow company.

Funds received from the buyer. The purchase deposit goes into an escrow trust account. When closing approaches, closing costs plus down payment are figured out. If the buyer pays this by a cashier’s check on a California bank, escrow can close the next day.

Deed or other escrow-related documents. The Grant Deed, signed by seller and transferring ownership to buyer, needs to be recorded before a new loan can be recorded. The title company is responsible for getting these documents to the County Recorder and recording them, but the escrow company must see that it gets done.

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Proration of taxes, interest, insurance and rents. The escrow officer does all the math, so everything is fairly divided on the day escrow closes.

Releases of all contingencies or other conditions. A common example: A sale may be subject to the buyer getting a new loan. If contingencies are not met, escrow cannot be closed.

Recording of deeds and other documents. This takes place at close of escrow. The title company almost always does this, then lets the escrow office know it’s been done so escrow can be closed.

Title insurance policy, which goes along with the title search. Title insurance protects the buyer in case the title company fails to uncover some claim against the property.

Closing escrow when everyone’s instructions have been carried out. It can be done when everything has been recorded and the money is in the hands of the title company.

Disbursement of funds, including charges for title insurance, recording fees, real estate commissions and loan payoffs. Buyer and seller get individual statements.

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Final statements for everyone involved.

If you’ve made it through all of this, congratulations! You’ve got yourself a new home.

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