Loan Document Knowledge Flashcards

Which document specifically details the borrower's monthly payment breakdown between principal and interest?

Answer: Amortization Schedule

The amortization schedule shows how each monthly payment is split between principal reduction and interest over the life of the loan.

What does 'assumability' mean in the context of a mortgage loan?

Answer: A new buyer can take over the existing loan's terms from the seller

An assumable mortgage allows a qualified buyer to take over the seller's existing loan, including its interest rate and remaining balance.

The 'due-on-sale' clause in a mortgage requires:

Answer: Full repayment of the loan when the property is transferred to a new owner

The due-on-sale (acceleration) clause allows the lender to demand full loan repayment if the property ownership is transferred.

On a Loan Estimate, which section covers 'Services You Can Shop For'?

Answer: Section C

Section C of the Loan Estimate lists third-party services (such as title search and settlement) for which the borrower may choose their own provider.

What is the significance of the 'First Payment Date' shown on the Note?

Answer: The date the borrower's first mortgage payment is due

The First Payment Date on the Note is when the borrower's first regular monthly principal and interest payment is due to the lender.

A 'prepayment penalty' clause in a loan document means:

Answer: The borrower may be charged a fee for paying off the loan ahead of schedule

A prepayment penalty clause allows the lender to charge a fee if the borrower pays off or refinances the loan before a specified period.

What document at a loan signing appointment transfers homeownership from seller to buyer?

Answer: Warranty Deed or Grant Deed

A Warranty Deed or Grant Deed is the instrument that legally conveys ownership of the property from the seller (grantor) to the buyer (grantee).