Loan Documents Definitions Flashcards
(32 cards)
Lender’s Instructions
The Lender’s instructions (sometimes called Closing Instructions) are literally typed out
instructions to the escrow and title companies from the lender on exactly how the lender wants
their loan closed. The borrower and the escrow officer usually sign the instructions
acknowledging them.
Packaging Tip: Since it is the LENDER’S instructions it should make sense that the lender
would get the original instructions back. And since the instructions are f or the escrow and title
company, it should make sense that they both would get a copy of the lender instructions.
1003 Loan Application
In the mortgage industry a loan application is call ten-oh-three. It is rarely called by its name but
referred to by the form #, which is 1003.
Packaging Tip: You can not get a loan that you have not applied for. This is why a borrower will
sign a loan application. And since the lender needs the borrower to apply for the loan it should
make sense that lender would get the original.
You would definitely classify this as vital document to the transaction, hence why escrow gets a
copy.
Notice of Right to Cancel
In a refinance transaction on a primary residence, the borrower gets three business days (not
including Sundays and some holidays) from the day they sign loan documents to cancel the
loan if they want. This is a law and cannot be waived.
Packaging Tip: The lender cannot fund the loan until this time period has past.
Closing Disclosure
Also known as the CD, the Closing Disclosure replaces what they used to call the truth in
lending form. And just like the old form implies this is what informs the borrower about
everything pertinent about the loan. Total interest over 30 years. All cost associated with the
transaction, just like the closing statement. The lender has to disclose everything about the loan
so the borrower has a concise look at what they are getting into. This form is a little redundant
as it has information found on different forms throughout the loan documents.
4506
The borrower signs this form to give permission to lender so the lender can request and receive
a copy of the borrower’s taxes that are filed with the IRS.
Occupancy Affidavit
This tells the lender whether the property being bought or refinanced is a primary residence,
second home or investment property.
Remember interest rates are tied to perceived risk. If you live in the house. The chances of
defaulting on your loan is less since you live in it. Therefore, you get a lower interest rate. If it is
an investment property, there is higher chance of default so the bank will give a higher interest.
California Domestic Partnership Addendum to Uniform Residential Loan Application
Some states recognize domestic partnerships as if two people are married. This form tells the
lender if they do or do not have a domestic partner.
Borrower Certification and Authorization
This form gives permission to lender to confirm employment, have their assets, credit report and
financial records in their possession.
Hazard insurance Authorization and Requirements.
Homes that have mortgages have to
have hazard insurance. This form also allows the lender to be the loss payee recorded on the
hazard insurance.
W-9
Interest paid on loans is tax deductible. This allows the borrower to write off the interest on their
taxes.
Acknowledgment of Receipt of Appraisal Report
If there was an appraisal completed the borrower has the right to a copy. By the borrower
signing this form they are confirming they have a copy.
Compliance Agreement
Just because the borrower has signed loan docs does not mean the loan will fund. This form
informs the borrower if anything else needs to be signed before the loan funds, the borrower will
comply with any requests.
Consumer Credit Disclosure
The borrower has the right to know their credit score. This form gives the borrower their credit
scores.
The Housing Financial Discrimination Act of 1977 Fair Lending Notice
This says the borrower was not discriminated against.
Hazard Insurance Disclosure
The max amount of insurance coverage the lender can force a borrower to have is replacement
cost of the house, not the appraised value.
California Impound Disclosure/Waiver
This form says whether the borrower has to have an impound/escrow account or if they request
to have one or decline to have one.
California per Diem Interest Disclosure
The Borrower has to pay interest the day the loan funds. This page tells the borrower how much
interest they per day(aka per diem). Understand the day the new loan funds the borrower is
responsible to pay interest.
You may notice two boxes that one needs to be checked. It’s because sometimes there is
overlapping interest. Let me explain, the problem that arises in refinance is if the new loan funds
on a Friday the borrower starts paying interest on the new loan. However, if the old loan will not
be paid off until Monday the borrower has to pay interest on two loans. In this case,the borrower
may want to check the box that states they do not want the new loan to be funded until after a
weekend is holiday so this situation never arises.
In a purchase the problem arises is if the loan funds on a Friday but the house doesn’t record
(meaning they don’t get the keys) until Monday. They would be paying interest on house they
don’t even own. Once again they may want to check the box that says they don’t want to fund
the loan until after a weekend or holiday to prevent this.
The other box states that they don’t care when the loan funds and understands they will start
paying interest immediately
Signature Affidavit and AKA Statement
The borrower signs this confirming their signature is their signature. This is why their signature
needs to be consistent. The lender uses this page to cross reference all signatures on the other
docs to make sure no one forged the borrower’s signatures.
All names found on the borrower’s credit report will go on the AKA section of this form. The
lender is letting them know the names that came up on their credit report. The borrower signs
the aka line exactly as their name appears to confirm that they have gone by this name before.
If the an AKA is not them, instead of signing the wrong name they print “not known as.”
Contact verification form
The borrower confirms all contact information the lender has for them is correct. Mailing
address, phone #’s, etc.
Counseling Checklist for Military Home Buyers
On VA loans the VA is letting the veteran know if they miss any payments, home counseling
may be required.
Essentially the counseling is letting them know how bad foreclosure is and they should not miss
more payments.
USA Patriot Act
This is where the notary signing agent records for the lender the ID information used to identify
the borrower.
Federal Equal Credit Opportunity Act Notice
This lets the borrower know that credit score was a determining factor on their approval. Also,
that they can discriminate based on credit score. Bad credit equals a higher interest rate.
Flood Insurance Coverage Subject to Change Disclosure
Flood zones are constantly being updated all over the country. The lender is letting them know
that if they are ever to be rezoned as a flood zone they will be required to have flood insurance
at that time.
Initial Escrow Account Disclosure Statement
This form shows how the impound account will look in the next 12 months. It shows the balance
every month for the next 12 months and when they make the tax and insurance payment and
for how much.
