Loan Signing Notary Cards Exam 2024/2025 Questions
With Verified Answers
Borrower (Mortgagor) - ANSWERAn individual who applies for and receives funds in
the form of a loan and is obligated to repay the loan in full under the terms of the
loan.
Title - ANSWERDocument that gives evidence of ownership of a property. Also
indicates the rights of ownership and possession of the property. Individuals who will
have legal ownership in the property are considered "on title" and will sign the
mortgage and other documentation
Refinancing - ANSWERThe process of paying off one loan with the proceeds from a
new loan secured by the same property.
Escrow Company - ANSWERA licensed neutral third party that distributes legal
documents and funds on behalf of a buyer and seller. The authority to ensure that
the seller, lender, and borrower all follow through on their agreed upon terms.
Escrow coordinates and keeps records of what is going on between all the parties--
seller, borrower, lender and title company.
Escrow Agent - ANSWERA person with fiduciary responsibility to the buyer and
seller, or the borrower and lender, to ensure that the terms of the purchase/sale or
loan are carried out.
Title Company - ANSWERThe title company ensures that a piece of real estate is
legitimate, then issues title insurance for that property that protects both the lender
and the owner from lawsuits as a result of title disputes. Their main responsibility in
a mortgage transaction is to accurately record liens, lien holders and ownership to
the property in a transaction--anything that is being recorded against the property.
They ensure that all liens, lien holders and ownership is recorded with the county
the property resides in.
Title Insurance - ANSWERInsurance that protects a lender against any title dispute
that may arise over a particular property. It is required to close on a residence. A
homeowner may also purchase owner's title insurance.
Lender - ANSWERThe lender is the bank that is lending the money. The lender has
the biggest role in the process, because without them lending the money, there
would be no need for a title or escrow company. This is the reason why the majority
of the documents in your loan signings are lender documents.
Deed of Trust - ANSWERThe deed of trust, also known as the mortgage in some
states, has 5 main functions: 1) It records who actually owns the property: e.g. Jane
Doe and John Doe, husband and wife as joint tenants; 2) It records the amount the
borrower is borrowing (the lien amount); 3) It records who is lending the money (the
,lien holder); 4) It records the legal description of the property (how the county
recognizes the property location via lot boundaries and lot location within the
county); 5) It states the rules and regulations which the property owner must abide
by.
Rider (to deed of trust) - ANSWERAmendments to the deed of trust that are
recorded with the deed. Something the lender wants to add to the deed. Examples
include VA riders, condo riders, adjustable rate riders, or PUD riders.
Principal - ANSWERThe amount of debt, not counting interest, left on a loan.
Note - ANSWERDocument outlining the terms of the loan. For example, the note
would specify that the borrower is borrowing $300,000 at a 4% interest rate, and will
have a certain fixed payment for 30 years. Also called the contract.
Interest Rate - ANSWERThe cost to the borrower for the money the bank lends to
them.
Fixed Rate Note - ANSWERPhrase indicating the interest rate will not change for the
duration of the loan. This allows the payment to stay the same for the full amount of
the term.
Adjustable Rate Mortgage (ARM) - ANSWERA loan with an adjustable interest rate
that will change during it's term, often after a set amount of years of fixed payments.
The payment may be low initially because it is based on payment that is 30 years,
but the rate will change/adjust after "X" years. The most common adjustable rate
terms are 3, 5, 7, or 10 years. After the fixed term is up, the interest rate will change
on a yearly basis until it is completely paid off. Also called 5/1, 7/1 or 10/1; ex: fixed
for 5 years and changes every year thereafter. After the initial term is up, the rate
will change via an index (usually the treasury bill or the LIBOR) plus a margin set by
the lender. The margin never changes but the index will go up or down.
Home Equity Line of Credit (HELOC) - ANSWERA line of credit that is tied to the
equity of the borrower's residence. Ex, the home is worth $500,000 and there is a
first loan for $200,000, that means there is $300,000 of equity. In this example, a
bank may approve the borrower for a line of credit for $100,000. The line of credit
works like credit card. The borrower makes payments on the amount they have
borrowed on the HELOC line of credit.
Reverse Mortgage - ANSWEREnables older homeowners (62+) to convert part of the
equity in their homes into tax-free income without having to sell the home, give up
title, or take on a new monthly mortgage payment. The reverse mortgage is aptly
named because the payment stream is "reversed." Instead of making monthly
payments to a lender, as with a regular mortgage, a lender makes payments to the
owner, based off the equity in the residence.
, Discount Points/Buy Down - ANSWERPoints are an up-front fee paid to the lender at
the time the loan is initiated. A borrower can lower (buy down) the interest rate they
qualified for by paying a fee. The borrower can literally buy down an interest rate.
Default - ANSWERWhen the borrower has not lived up to the agreed upon terms of
repayment on the loan.
Foreclosure - ANSWERThe process initiated by the lender when the borrower has not
made the agreed upon repayments. The bank can take the property away from the
borrower. The lender will then own the property. Most lenders start the foreclosure
process after 3 consecutive missed payments.
Lien - ANSWERA form of security interest granted over a property to secure the
payment of a debt. Anyone can put a lien against a property as long as they have the
owners' consent. In term of mortgages, when the bank lends money to a borrower,
they guarantee repayment by recording a lien against the property. The lien
recorded equals what they have lent the borrower. If the borrower fails to live up to
the agreed upon repayment terms, the lender has the right to sell the property and
recoup the lien amount.
Property tax - ANSWERTaxes that are due to the county where the property resides.
Usually due twice a year.
Impound Account/Escrow Account - ANSWERAn account established to collect
property tax and hazard/fire insurance on the property. Sometimes required by the
lender as a term of the loan. The impound account and escrow account are the same
thing. As the taxes and insurance come due, the lender will make the payments for
the borrower. Not all borrowers are required to have an impound account, but they
may prefer it.
Amortization - ANSWERRepayment of a loan with periodic payments of both
principal and interest calculated to pay off the loan at the end of a fixed period of
time.
Hazard Insurance - ANSWERProtects the insured against loss due to fire or other
natural disaster in exchange for a premium paid to the insurer.
PITI - ANSWERAbbreviation for Principal, Interest, Taxes and Insurance; the
components of a monthly mortgage payment.
FHA Loans - ANSWERFixed- or adjustable-rate loans insured by the U.S. Department
of Housing and Urban Development. FHA loans are designed to make housing more
affordable, particularly for first-time home buyers. FHA loans typically permit
borrowers to buy a home with a lower down payment than conventional loans. With
FHA insurance, eligible buyers can purchase a home with a down payment of as little
as 3% of the appraised value or the purchase price, whichever is lower.
With Verified Answers
Borrower (Mortgagor) - ANSWERAn individual who applies for and receives funds in
the form of a loan and is obligated to repay the loan in full under the terms of the
loan.
Title - ANSWERDocument that gives evidence of ownership of a property. Also
indicates the rights of ownership and possession of the property. Individuals who will
have legal ownership in the property are considered "on title" and will sign the
mortgage and other documentation
Refinancing - ANSWERThe process of paying off one loan with the proceeds from a
new loan secured by the same property.
Escrow Company - ANSWERA licensed neutral third party that distributes legal
documents and funds on behalf of a buyer and seller. The authority to ensure that
the seller, lender, and borrower all follow through on their agreed upon terms.
Escrow coordinates and keeps records of what is going on between all the parties--
seller, borrower, lender and title company.
Escrow Agent - ANSWERA person with fiduciary responsibility to the buyer and
seller, or the borrower and lender, to ensure that the terms of the purchase/sale or
loan are carried out.
Title Company - ANSWERThe title company ensures that a piece of real estate is
legitimate, then issues title insurance for that property that protects both the lender
and the owner from lawsuits as a result of title disputes. Their main responsibility in
a mortgage transaction is to accurately record liens, lien holders and ownership to
the property in a transaction--anything that is being recorded against the property.
They ensure that all liens, lien holders and ownership is recorded with the county
the property resides in.
Title Insurance - ANSWERInsurance that protects a lender against any title dispute
that may arise over a particular property. It is required to close on a residence. A
homeowner may also purchase owner's title insurance.
Lender - ANSWERThe lender is the bank that is lending the money. The lender has
the biggest role in the process, because without them lending the money, there
would be no need for a title or escrow company. This is the reason why the majority
of the documents in your loan signings are lender documents.
Deed of Trust - ANSWERThe deed of trust, also known as the mortgage in some
states, has 5 main functions: 1) It records who actually owns the property: e.g. Jane
Doe and John Doe, husband and wife as joint tenants; 2) It records the amount the
borrower is borrowing (the lien amount); 3) It records who is lending the money (the
,lien holder); 4) It records the legal description of the property (how the county
recognizes the property location via lot boundaries and lot location within the
county); 5) It states the rules and regulations which the property owner must abide
by.
Rider (to deed of trust) - ANSWERAmendments to the deed of trust that are
recorded with the deed. Something the lender wants to add to the deed. Examples
include VA riders, condo riders, adjustable rate riders, or PUD riders.
Principal - ANSWERThe amount of debt, not counting interest, left on a loan.
Note - ANSWERDocument outlining the terms of the loan. For example, the note
would specify that the borrower is borrowing $300,000 at a 4% interest rate, and will
have a certain fixed payment for 30 years. Also called the contract.
Interest Rate - ANSWERThe cost to the borrower for the money the bank lends to
them.
Fixed Rate Note - ANSWERPhrase indicating the interest rate will not change for the
duration of the loan. This allows the payment to stay the same for the full amount of
the term.
Adjustable Rate Mortgage (ARM) - ANSWERA loan with an adjustable interest rate
that will change during it's term, often after a set amount of years of fixed payments.
The payment may be low initially because it is based on payment that is 30 years,
but the rate will change/adjust after "X" years. The most common adjustable rate
terms are 3, 5, 7, or 10 years. After the fixed term is up, the interest rate will change
on a yearly basis until it is completely paid off. Also called 5/1, 7/1 or 10/1; ex: fixed
for 5 years and changes every year thereafter. After the initial term is up, the rate
will change via an index (usually the treasury bill or the LIBOR) plus a margin set by
the lender. The margin never changes but the index will go up or down.
Home Equity Line of Credit (HELOC) - ANSWERA line of credit that is tied to the
equity of the borrower's residence. Ex, the home is worth $500,000 and there is a
first loan for $200,000, that means there is $300,000 of equity. In this example, a
bank may approve the borrower for a line of credit for $100,000. The line of credit
works like credit card. The borrower makes payments on the amount they have
borrowed on the HELOC line of credit.
Reverse Mortgage - ANSWEREnables older homeowners (62+) to convert part of the
equity in their homes into tax-free income without having to sell the home, give up
title, or take on a new monthly mortgage payment. The reverse mortgage is aptly
named because the payment stream is "reversed." Instead of making monthly
payments to a lender, as with a regular mortgage, a lender makes payments to the
owner, based off the equity in the residence.
, Discount Points/Buy Down - ANSWERPoints are an up-front fee paid to the lender at
the time the loan is initiated. A borrower can lower (buy down) the interest rate they
qualified for by paying a fee. The borrower can literally buy down an interest rate.
Default - ANSWERWhen the borrower has not lived up to the agreed upon terms of
repayment on the loan.
Foreclosure - ANSWERThe process initiated by the lender when the borrower has not
made the agreed upon repayments. The bank can take the property away from the
borrower. The lender will then own the property. Most lenders start the foreclosure
process after 3 consecutive missed payments.
Lien - ANSWERA form of security interest granted over a property to secure the
payment of a debt. Anyone can put a lien against a property as long as they have the
owners' consent. In term of mortgages, when the bank lends money to a borrower,
they guarantee repayment by recording a lien against the property. The lien
recorded equals what they have lent the borrower. If the borrower fails to live up to
the agreed upon repayment terms, the lender has the right to sell the property and
recoup the lien amount.
Property tax - ANSWERTaxes that are due to the county where the property resides.
Usually due twice a year.
Impound Account/Escrow Account - ANSWERAn account established to collect
property tax and hazard/fire insurance on the property. Sometimes required by the
lender as a term of the loan. The impound account and escrow account are the same
thing. As the taxes and insurance come due, the lender will make the payments for
the borrower. Not all borrowers are required to have an impound account, but they
may prefer it.
Amortization - ANSWERRepayment of a loan with periodic payments of both
principal and interest calculated to pay off the loan at the end of a fixed period of
time.
Hazard Insurance - ANSWERProtects the insured against loss due to fire or other
natural disaster in exchange for a premium paid to the insurer.
PITI - ANSWERAbbreviation for Principal, Interest, Taxes and Insurance; the
components of a monthly mortgage payment.
FHA Loans - ANSWERFixed- or adjustable-rate loans insured by the U.S. Department
of Housing and Urban Development. FHA loans are designed to make housing more
affordable, particularly for first-time home buyers. FHA loans typically permit
borrowers to buy a home with a lower down payment than conventional loans. With
FHA insurance, eligible buyers can purchase a home with a down payment of as little
as 3% of the appraised value or the purchase price, whichever is lower.
