Module 7 of 13 / National concepts

Financing and settlement

Connect loan structure, borrower qualification, required disclosures and closing protections.

Outline allocation: 7 of 80 scored questions. Reviewed October 15, 2026.

What you will learn

Compare common loans and mortgage clauses.
Explain TRID and RESPA protections.
Recognize qualification and fraud risks.

The loan and the security

A promissory note states the debt obligation; a mortgage or deed of trust provides security in real property. Lien-theory and title-theory treatment varies by jurisdiction. An acceleration clause can make the balance due after a specified default; a due-on-sale clause concerns an unauthorized transfer; a defeasance provision concerns release when the obligation is satisfied. Amortization repays principal over time, while an interest-only structure may leave principal for a balloon payment. Source note: California DRE chapters support general concepts only; use the Pennsylvania modules and linked Pennsylvania authorities for state-specific rules.

Work through an example

A borrower pays only interest for five years; the principal has not disappeared when the balloon becomes due.

Remember: The note is the promise to pay; the security instrument ties the property to the debt.

Products, qualification and markets

Conventional loans are not government-insured or guaranteed. FHA insures qualifying lender loans; VA guarantees eligible loans; USDA programs target qualifying borrowers and properties. Eligibility does not promise approval. Lenders analyze income, debts, assets, credit and collateral. LTV compares the loan to the applicable value basis; a higher down payment lowers LTV. Primary lenders originate loans; secondary markets purchase or securitize loans. Private mortgage insurance protects the lender against specified borrower-default losses, not the borrower’s moving costs.

Work through an example

A $240,000 loan on a $300,000 value basis has an 80% LTV. A borrower still must satisfy the lender’s other underwriting requirements.

Remember: Prequalification is not a final loan commitment.

Loan Estimate and Closing Disclosure

For a covered TRID mortgage, the lender generally must deliver or mail a Loan Estimate within three business days after receiving the six application elements. A consumer must receive the initial Closing Disclosure at least three business days before consummation. Not every last-minute correction restarts that waiting period; an inaccurate APR beyond the applicable tolerance, a changed loan product or a newly added prepayment penalty can. APR reflects the cost of credit under regulatory rules and differs from the note rate.

Work through an example

Changing an ordinary seller credit does not automatically create the same waiting-period result as changing the loan product.

Remember: Do not apply TRID timing to every conceivable loan without checking coverage.

Settlement protections and accurate applications

RESPA prohibits covered settlement-service kickbacks and unearned fee splitting. A referral agreement can be inferred from a pattern; calling a payment marketing does not make it lawful. Permitted payments for actual services must satisfy applicable rules. ECOA prohibits discrimination in credit under its protected categories. Falsifying occupancy, income, gift funds or side agreements creates fraud risk. At closing, compare contract terms, loan figures, credits and verified payoffs, and resolve discrepancies before signing.

Work through an example

A title provider paying an agent for each covered mortgage closing solely for the referral is not payment for an actual title service.

Remember: A useful referral must not become a prohibited kickback.

Check your understanding

Close your notes and explain the rule in your own words. Change one fact in an example: does the answer change? Use topic practice in the study room, then return to any rule you missed.

Practice in the study room →Next unit →

Sources and further reading

California DRE references support general national concepts only. Their California-specific rules are not Pennsylvania law; use the PA sources for state requirements.

Supplemental study only. State rules and transaction details matter; consult the linked official sources for the complete requirements. This lesson provides no prelicensing credit.