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Terminology
It's a legal lending document that says the borrower promises to repay to the lender a certain amount of money in a certain time frame.
A security instrument given by a borrower to secure performance of payment under a note. The document is recorded in county land records, creating a lien (encumbrance) on the property.
Collateral is the security put up in exchange for a loan, which can be taken by the bank if the loan goes unpaid. In the case of a secured note, the collateral is the property.
Comps are used in assessing or establishing the fair market value of a property, a property which has been sold recently that is similar in size, condition, location and amenities.
A personal guarantee is a promise made by a person or an organization to accept responsibility for some other party's debt if the debtor fails to pay it.
Fee paid by a borrower to obtain a loan. A point is one percent of the principal amount of the loan. The borrower may usually pay more points to reduce the interest rate of the loan.
A state where consideration, benefits, legal rights, document, or a sum of money is held by one person in trust for another, for the purpose of assuring performance under an agreement. Normally in a residential real estate sale, the title company is the escrow agent for the deposit money securing the deal until closing. The money is held in an escrow account.
Title is the evidence of ownership. In essence, title is more important than ownership because having proper title is proof of ownership. If you have a problem with your title, you will have trouble proving your ownership, and thus selling or mortgaging your property.
Title search is a process that examines local public records, laws and related court decisions to determine if any other parties have valid claims against the subject property (such as past due taxes, judgments or mechanics' liens). It also discloses past and current facts about the subject property's ownership.
An insurance policy that protects the insured (purchaser and/or lender) against loss arising from defects in title. A policy protecting the lender is called a "Loan Policy," whereas a policy protecting the purchaser is called an "Owner's Policy."
The closing is when the transfer of ownership of a property from the seller to the buyer occurs according to the sales contract. Generally takes place at a title company or attorney’s office.
A statement prepared by a closing agent (usually a title or escrow company) giving a complete breakdown of costs and charges involved in a real estate transaction. Required by RESPA on a Closing Statement or HUD-1.
Hazard insurance is the part of your homeowners insurance policy that covers the structure of your home from common perils, such as fire, vandalism and theft.
A proceeding to extinguish all rights, title, and interest of the owner(s) of property in order to sell the property to satisfy a lien against it. About half of the states use a "mortgage foreclosure," which is a lawsuit in court. About half use a "power of sale" proceeding which is dictated by a deed of trust and is usually less time consuming. Texas is a “power of sale” state.
Our Lending Model - Minimizing Risk
We minimize risk by requiring that the borrower put up subject property as collateral for loan.
We minimize risk by requiring that all loans are secured with an owner’s and lender’s title policy.
We minimize risk by requiring that all borrowers purchase hazard insurance on subject property based on After Repair Value.
We minimize risk by requiring that all loans be backed by personal guarantees.
Due Diligence - Loan Process
- Experience
- Credit Check
- Proof of Funds
- Loan Ratios
- Comps
- Inspection
- Location
- Desirability
- Loan Documents
- Title Documents
- Funds
- Closing
- Draws
- Inspections
- Payoff Statement
- Lien Release