Loan Terms and Definitions

Having knowledge of loan definitions and terms is a great asset when buying or selling property, or when applying for a home loan, whether it is conventional, FHA, VA, or reverse mortgage loan, a business loan, or refinancing your current loan. The more knowledge you take into the process, the easier it to understand what you are being told and the documents that you have to sign.

Unless you are consistently buying property or getting loans and you know most of the terms used, you may not feel comfortable when you have to read or sign loan documents.

Reading and understanding the documents that you have to sign may not seem that important but what you sign will have a huge impact on you for many years to come.

Many of the documents in the loan application process are really not self explanatory and have meanings that only those who wrote them can understand. If you don't understand them, you are not alone.

Most people depend on their realtor or their loan officer, or both, to get them through the process. But you should take the initiative and acquire some basic knowledge of the loan process because nothing is greater than peace of mind at the end of the day.

You are going to see many papers, such as deposit receipts, loan applications, loan documents, escrow instructions, title insurance documents, home warranty plan forms, homeowners insurance forms, appraisals, termite reports and completions, disclosure statements, environmental and hazard reports, addendums, and many other documents that are associated with the transaction.

There are a lot of signatures required and you will see a lot of terms that are used over and over again but there are some very important terms that you may see only once or twice during the entire process.

In the realm of the loan process, knowledge is the key to understanding and protecting yourself, and your short and long term interests. When you are applying for a loan, whether secured or unsecured, it's not going to be about who you know, it's all about what you know and how you use your knowledge.

In this section, you will view the ABC's of loan definitions and terms that will give you a better understanding of the loan process.

Finance Topic of the Month: Buying a home is still the best investment most people will make in their lifetime.