Loan Officer Practice Exam

Which document primarily outlines the terms of a mortgage loan?

1. Loan Estimate

2. Closing Disclosure

3. Promissory Note

4. Loan Agreement

The correct answer is: Loan Estimate

The document that primarily outlines the terms of a mortgage loan is the Promissory Note. This document is a legal contract in which the borrower agrees to repay the loan amount along with any specified interest. It details the loan amount, interest rate, repayment schedule, and the borrower's obligations in relation to the mortgage. While the Loan Estimate and Closing Disclosure are important documents in the mortgage process, they serve different purposes. The Loan Estimate provides a summary of the loan terms, estimated costs, and closing costs but does not serve as a binding agreement. The Closing Disclosure, provided before closing the loan, gives a final breakdown of fees and terms, but it is not the document that establishes the borrower's agreement to repay the loan. The Loan Agreement, while relevant, may not be a standardized document across all mortgage transactions and can vary in scope and contents. In summary, the correct choice focuses on the document that legally binds the borrower to repay the loan according to the specified terms, which is encapsulated in the Promissory Note.