The Role Of Loan Agreements In Financing Transactions

In this article, you can discover…

• The essential elements of a loan agreement.
• The borrower’s responsibilities under a loan agreement,
• How an attorney can help you draft and review a secure loan agreement. 

What Is A Loan Agreement?

A loan agreement (also called a promissory note) lays out the terms of the loan to be used in a real estate transaction. The loan agreement establishes who the buyer is, who the seller is, who the lender is, and how much is being loaned. It will also include interest rates, expected monthly payments, and any taxes or insurance to be paid.

Loan agreements also lay out how the lender (usually a bank) is going to be paid, the penalties for late payments, and the date by which the loan must be paid back. It’s important to make sure to have an attorney look over any loan agreements before you sign them to ensure the terms are fair, understandable, and drafted correctly. 

How Can An Attorney Negotiate Favorable Terms In A Loan Agreement?

If you are the borrower, an attorney can work to make sure the terms of the loan agreements are lenient. This can include lower penalties for late payments or flexible options if payments can not be made on time. 

If you are the lender, your attorney can work to make sure the loan agreement protects your financial interests and makes the foreclosure process easier should you need to use this option.

Attorney Farren Sheehan is a veteran, skilled real estate attorney serving Texas. For over 20 years, she’s helped clients just like you better understand loan agreement terms, make sure they can meet those terms, and negotiate for agreements that are fair and reasonable.

Have questions, or in need of quality legal guidance? Reach out to Sheehan Law, PLLC at (512) 355-0155 for an initial consultation today!

What Are The Borrower’s Responsibilities Under A Loan Agreement?

Your responsibilities as a borrower include the responsibilities listed under the promissory note, such as payment amounts, payment dates, penalties for late payments and the date by which the loan must be repaid. 

Also included are any responsibilities listed in the deed of trust, a separate document that explains your obligation to keep the property in good condition, pay property taxes and insurance, and not convey the property before you have paid off the loan.

The deed of trust also outlines the lender’s right to foreclose should payments not be made, take back the property, and sell it to recover the money they are owed. 

What Are The Consequences Of Breaching A Loan Agreement?

Penalties are outlined in detail in the deed of trust. These penalties could range from a small late payment fee to foreclosure for nonpayment. This makes the terms of the loan agreement very important to negotiate properly, as those terms establish what will realistically happen when payments are missed. 

How Can An Attorney Help In Drafting And Reviewing A Loan Agreement?

It is vital to make sure that you understand what you are signing. This means having an in-depth, realistic grasp of the terms of the loan agreements, penalties for late payments, and the impacts these terms will have on your finances. 

An experienced, attentive attorney will sit down with you at length and help you understand the terms of the loan agreement. They’ll also help you grasp what those terms mean for your month-to-month payment obligations and what will happen if you miss a payment. 

Finally, an attorney can negotiate for terms that are fairer to you or easier for you to meet, making property ownership simpler, less stressful, and more manageable in the long run. 

Still Have Questions? Ready To Get Started? For more information on The Role Of Loan Agreements In Financing Transactions, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (512) 355-0155 today.