Loan document definitions

Question 1

Lender’s Instructions

Answer 1

(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.

Question 2

1003 Loan Application

Answer 2

Another term for a loan application often used In the mortgage industry

Question 3

Notice of Right to Cancel

Answer 3

In a refinance transaction on a primary residence, the borrower gets three business days (not
including Sunday’s 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.

Question 4

Closing Disclosure

Answer 4

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 disclosed 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.

Question 5

4506

Answer 5

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.

Question 6

Occupancy Affidavit

Answer 6

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.

Question 7

Borrower Certification and Authorization

Answer 7

This form gives permission to lender to confirm employment, have their assets, credit report and
financial records in their possession

Question 8

Hazard insurance Authorization and Requirements.

Answer 8

H omes that have mortgages have to
have hazard insurance. This form also allows the lender to be the loss payee recorded on the
hazard insurance.

Question 9

W-9

Answer 9

Interest paid on loans is tax deductible. This allows the borrower to write off the interest on their
taxes.

Question 10

Acknowledgment of Receipt of Appraisal Report

Answer 10

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.

Question 11

Compliance Agreement

Answer 11

Just because the borrower has signed loan docs does not mean the loan will fund. This form
informs the borrower if anything else need to be signed before the loan funds, the borrower will
comply with any requests.

Question 12

Consumer Credit Disclosure

Answer 12

The borrower has the right to know their credit score. This form gives the borrower their credit
scores.

Question 13

Hazard Insurance Disclosure

Answer 13

The max amount of insurance coverage the lender can force to borrower to have is replacement
cost of the house. Not the appraised value.

Question 14

Signature Affidavit and AKA Statement

Answer 14

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.”

Question 15

USA Patriot Act

Answer 15

This is where the notary signing agent records for the lender the ID information used to identify
the borrower.

Question 16

Federal Equal Credit Opportunity Act Notice

Answer 16

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.

Question 17

Initial Escrow Account Disclosure Statement

Answer 17

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.

Question 18

Mailing Address Certification

Answer 18

Not all borrowers want the mortgage statement (the bill) sent to the property address. This form
lets the lender know exactly where the borrower prefers the bill.

Question 19

Notice Concerning the Furnishing of Negative Information to the Consumer Reporting
Agency

Answer 19

This form states if the borrower misses a mortgage payment, it will be reported and negatively
affect their credit score

Question 20

Payment Letter to Borrower

Answer 20

This form is two different forms in one form for most lenders. First and foremost it tells the
borrower what their full payment is including their impound account, if they have one (the note
only shows you what the principal and interest is).
This form also dubs as their first payment coupon in the rare case the lender forgets to the bill
the borrower. There is an an address on where to send the first payment to.

Question 21

Payoff Schedule/Amortization Table

Answer 21

This shows every payment for the duration of the loan. Breaking down every payment into what
goes to principal and what goes to interest

Question 22

Federal Collection Policy Notice

Answer 22

This lets the borrower know how the lender will or will not share their information.