At settlement you will sign papers legally obligating you to pay the mortgage loan financing the purchase of your home. You must pay according to the terms of the loan-interest rate, amount and due date of each monthly payment, repayment period – specified in the documents signed by you. You will probably sign at settlement a note or bond which is your promise to repay the loan for the unpaid balance of the purchase price. You will also sign a mortgage or deed of trust which pledges your home as security for repayment of the loan.

Failure to make monthly mortgage payments on time may lead to a late payment charge, if provided for in the documents. If you default on the loan by missing payments altogether and do not make them up within a period of time usually set by State law, the documents also specify certain actions which the lender may take to recover the amount owed. Ultimately, after required notice to you, a default could lead to foreclosure and sale of the home which secures your loan.

You should also be careful to maintain your home in a proper state of repair, both for your own satisfaction and comfort as the occupant and because the home is security for your loan. The mortgage or deed of trust must in fact specifically obligate you to keep the property in good repair and not allow deterioration.

In the event you do get into financial difficulty, you may wish to contact your local HUD office for a copy of two publications, Avoiding Mortgage Default (HUD-426 (PA) (7)) and Equity Skimming (Mortgage Letter 85-21). The publication on equity skimming warns homeowners about various methods which unscrupulous investors have used to take advantage of homeowners under the pretense of offering to help them out of their financial difficulty.

Read the documents carefully at or before settlement, and be aware of your obligations as a homeowner.

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