Loan applications are an important, but sometimes overlooked, component of the mortgage financing process. A properly drafted loan application, among other things:

• Identifies the correct borrower and guarantor (if any) and describes the proposed loan structure and the information that the lender will use to underwrite and approve the loan;

• Contains any transaction-specific provisions required by the lender and the borrower;

• Lists the lender’s due diligence and closing requirements and contains a timetable for the borrower satisfying those requirements;

• Describes the fees and expenses that are payable by the borrower in connection with the proposed loan;

• Establishes the conditions under which either the borrower or the lender may terminate the loan application process, as well as the respective rights and obligations of the parties in the event of a termination; and

• Provides the basis for the lender to prepare the commitment letter and the loan documents (assuming the loan is approved).

By identifying and incorporating important deal terms into the loan application, the borrower and its counsel can avoid costly misunderstandings with the lender and can also expedite the due diligence, loan commitment, and closing processes.

The Practical Real Estate Lawyer

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