To be successful as a loan signing agent, it’s essential to have a comprehensive grasp of basic real estate and mortgage financing terms. This will allow you to guide borrowers through purchasing a home or refinancing seamlessly. You will be able to explain each document’s purpose and significance more effectively, ensuring that borrowers clearly understand the process.
Your understanding of key terms also helps to minimize misunderstandings and reduce errors that can cause a delay in the funding of a loan.
Below is a list of key terms every loan signing agent should know.
| Absorption rate | The rate at which homes are sold in a specific market over a given time period. |
| Agent | A licensed professional who represents buyers or sellers in real estate transactions. |
| Amortization | The process of paying off a loan over time with regular payments. |
| Annual fee | A fee charged once a year for a loan or credit card. |
| Appraisal | An evaluation of the value of a property. |
| Appurtenance | A right or privilege that comes with ownership of a property. |
| Assumption | The process of taking over someone else’s loan. |
| Balloon mortgage | A mortgage where a large payment is due at the end of the loan term. |
| Balloon payment | A large payment due at the end of a loan term. |
| Building code | Local regulations that dictate the minimum standards for construction and safety of buildings. |
| Broker | A person or entity that connects borrowers with lenders. |
| Cap | A limit on how much an interest rate can change. |
| Capital gains | The profit made from selling a property at a higher price than what was paid for it. |
| Cash-out refinance | Refinancing a loan for more than the amount owed in order to receive cash. |
| Certificate of occupancy | A document that certifies a property is safe to occupy. |
| Closing | The final step in a real estate transaction where the property is transferred to the buyer and payment is made to the seller. |
| Closing costs | Fees associated with the closing of a loan. |
| Conforming loan | A loan that meets the requirements of Fannie Mae and Freddie Mac. |
| Contingency | A condition that must be met before a real estate transaction can be completed. |
| Credit report | A record of a person’s credit history. |
| Debt consolidation | The process of combining multiple debts into one loan. |
| Debt-to-income ratio | The ratio of a person’s debt to their income. |
| Deed | A legal document that transfers ownership of real estate. |
| Default | Failure to make payments on a loan. |
| Disclosure | A written statement that reveals all relevant information about a loan. |
| Disbursement | The act of paying out money for a loan. |
| Earnest money | A deposit made by a buyer to show their commitment to purchasing a property. |
| Equity | The difference between the value of a property and the amount owed on any outstanding loans. |
| Equity loan | A loan that uses a property’s equity as collateral. |
| Fair Housing Act | A federal law that prohibits discrimination in the sale, rental, and financing of housing. |
| FHA loan | A loan insured by the Federal Housing Administration. |
| Fiduciary | A person or entity that acts in the best interest of another. |
| Fixed rate | An interest rate that does not change over time. |
| Foreclosure | The legal process by which a lender takes possession of collateral due to default. |
| Good faith estimate | An estimate of the costs associated with a loan. |
| Grace period | A period of time after a payment is due where no penalty is assessed. |
| Hazard insurance | Insurance that protects against damage to property. |
| Home equity loan | A loan that uses a property’s equity as collateral. |
| Home inspection | A thorough examination of a property’s condition before purchase. |
| Homeowners insurance | Insurance that protects against damage to a property. |
| Interest | The fee charged for borrowing money. |
| Interest-only loan | A loan where only interest is paid for a period of time before principal payments begin. |
| Jumbo loan | A loan that exceeds the maximum amount allowed by Fannie Mae and Freddie Mac. |
| Late fee | A penalty assessed for a missed payment. |
| Lender | The person or entity that provides the loan. |
| Listing agreement | A contract between a seller and a real estate agent that outlines the terms of the agent’s representation. |
| Loan agreement | A written contract that outlines the terms of the loan. |
| Loan application | A form used to apply for a loan. |
| Loan modification | A change to the terms of a loan. |
| Loan officer | A person who works for a lender and helps with loan applications. |
| Loan origination fee | A fee charged by the lender for processing a loan application. |
| Loan servicing | The management of a loan, including collecting payments and handling defaults. |
| Loan-to-value ratio | The ratio of the loan amount to the value of the property. |
| Multiple Listing Service (MLS) | A database of properties for sale that is shared among real estate agents. |
| Net worth | The value of a person’s assets minus their liabilities. |
| Nonconforming loan | A loan that does not meet the requirements of Fannie Mae or Freddie Mac. |
| Note | A written promise to pay back a loan. |
| Open-end mortgage | A mortgage that allows the borrower to borrow more money in the future. |
| Origination | The process of creating a new loan. |
| Origination fee | A fee charged by a lender for processing a loan application. |
| Payment schedule | A plan for making loan payments. |
| Pledge | To use property as collateral for a loan. |
| Points | Fees charged by a lender to lower the interest rate on a loan. |
| Pre-approval | A preliminary determination of loan eligibility. |
| Pre-foreclosure | The period of time between a borrower missing mortgage payments and the property being foreclosed on. |
| Pre-qualification | A preliminary determination of loan eligibility. |
| Principal | The amount borrowed on a loan. |
| Promissory note | A written promise to pay back a loan. |
| Rate lock | An agreement to lock in an interest rate for a specific period of time. |
| Real estate | Property consisting of land and the buildings on it, along with its natural resources. |
| Refinancing | The process of replacing an existing loan with a new one. |
| Repayment plan | A plan for paying back a loan. |
| Reverse mortgage | A loan where the borrower receives payments from the lender based on the equity in their property. |
| Second mortgage | A loan that uses a property’s equity as collateral and is subordinate to the first mortgage. |
| Security interest | The lender’s right to seize collateral if the loan is not repaid. |
| Seller’s market | A market where there are more buyers than available properties, giving sellers the upper hand in negotiations. |
| Servicer | The entity responsible for collecting loan payments and managing defaults. |
| Simple interest | Interest calculated only on the principal amount borrowed. |
| Subprime loan | A loan provided to borrowers with poor credit histories. |
| Term | The length of time over which a loan is repaid. |
| Title | Legal ownership of property. |
| Title company | A company that ensures the title to a property is legitimate and issues title insurance. |
| Title insurance | Insurance that protects against any defects in a property’s title. |
| Title search | A search of public records to verify ownership of property. |
| Truth in Lending Act | A federal law that requires lenders to disclose the true cost of credit. |
| Underwater | When the amount owed on a property exceeds its value. |
| Underwriting | The process of evaluating a loan application to determine its risk. |
| Usury | Charging an illegal or excessive amount of interest on a loan. |
| VA loan | A loan guaranteed by the Department of Veterans Affairs for military veterans. |
| Variable rate | An interest rate that can change over time. |
| Verification | The process of confirming information on a loan application. |
| Yield spread premium | A fee charged by a lender for providing a loan with a higher interest rate. |