Real Estate Loan Agreement
This Real Estate Loan Agreement ("Agreement") is entered into as of [Closing Date] ("Closing Date"), by and between:
LENDER: [Lender Name], whose address is [Lender Address] ("Lender"); and
BORROWER: [Borrower Name], whose address is [Borrower Address] ("Borrower").
WHEREAS, Borrower desires to borrow funds from Lender, secured by real property, and Lender is willing to advance funds on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows:
1. COLLATERAL PROPERTY
The loan is secured by the following real property (the "Property"):
Street Address: [Property Address]
Legal Description: [Legal Description]
The security for this Loan shall be evidenced by a [Security Instrument] executed by Borrower and recorded in the county land records, pledging the Property as collateral. The [Security Instrument] shall be executed simultaneously with this Agreement and recorded at or promptly following Closing.
2. LOAN AMOUNT AND INTEREST
Lender agrees to advance the principal sum of [Loan Amount] ("Loan") to Borrower on the Closing Date. The Loan shall bear interest at the fixed rate of [Interest Rate] per annum on the outstanding principal balance, calculated on a 30/360-day basis.
The Loan shall be fully amortized over a term of [Loan Term] years. The total amount of interest payable over the full loan term, if all payments are made as scheduled, is disclosed in the Closing Disclosure or attached amortization schedule.
3. REPAYMENT SCHEDULE
Borrower shall repay the Loan in equal monthly installments of principal and interest of [Monthly Payment] each, commencing on [First Payment Date] and continuing on the same day of each successive month until the Loan is fully repaid. All payments shall be delivered to Lender at [Lender Address], or by such other means as Lender designates in writing.
Late Fee: If any payment is not received by Lender within fifteen (15) days after its due date, Borrower shall pay a late fee equal to [Late Fee] of the overdue payment amount. The late fee is in addition to, and not in lieu of, Lender's other remedies.
4. DUE-ON-SALE / ALIENATION CLAUSE
Due-on-Sale Applicable: [Due-on-Sale]
If yes: If Borrower sells, transfers, assigns, or otherwise alienates the Property, or any interest therein, without Lender's prior written consent, Lender may, at its option, declare the entire outstanding principal balance, together with all accrued interest and charges, immediately due and payable. This provision is enforceable pursuant to the Garn-St Germain Depository Institutions Act of 1982 (12 U.S.C. § 1701j-3).
5. ESCROW FOR TAXES AND INSURANCE
Escrow Required: [Escrow Required]
If yes: Borrower shall pay to Lender, concurrently with each monthly P&I installment, a sum equal to one-twelfth (1/12) of the estimated annual real property taxes and hazard insurance premiums for the Property ("Escrow Funds"). Lender shall apply Escrow Funds to pay property taxes and insurance when due. Borrower shall maintain hazard insurance on the Property in amounts satisfactory to Lender, naming Lender as additional insured and loss payee, and shall provide evidence of such insurance upon request.
6. PREPAYMENT
Prepayment Penalty: [Prepayment Penalty]
If no prepayment penalty: Borrower may prepay the Loan, in whole or in part, at any time without penalty. Prepayments will be applied first to accrued and unpaid interest, then to reduction of outstanding principal.
If prepayment penalty applies: Borrower may prepay the Loan only subject to a prepayment penalty as separately agreed in writing between the parties and attached as an exhibit to this Agreement, subject to applicable [Governing State] law governing prepayment penalties.
7. DEFAULT AND FORECLOSURE
Borrower shall be in default under this Agreement upon: (a) failure to make any monthly payment within fifteen (15) days of its due date; (b) failure to maintain required insurance on the Property; (c) abandonment of the Property; (d) material misrepresentation in the loan application; (e) commencement of bankruptcy or insolvency proceedings; or (f) breach of any obligation under the [Security Instrument] or this Agreement.
Upon default, Lender may, at its option: (i) accelerate the Loan and declare the entire outstanding balance immediately due and payable; (ii) proceed to foreclose on the Property pursuant to the terms of the [Security Instrument] and applicable [Governing State] foreclosure law; and (iii) exercise all other rights and remedies available under the [Security Instrument], this Agreement, and applicable law.
In states using a Deed of Trust, foreclosure may proceed non-judicially by trustee's sale upon the required notice and cure periods. In mortgage states, judicial foreclosure proceedings are required. Any deficiency remaining after application of foreclosure sale proceeds to the outstanding balance shall be governed by applicable [Governing State] anti-deficiency statutes.
8. BORROWER COVENANTS
Borrower covenants and agrees to: (a) maintain the Property in good condition and repair and not commit waste; (b) pay all property taxes and assessments before they become delinquent; (c) maintain adequate hazard insurance as required herein; (d) comply with all applicable laws, zoning ordinances, and regulations; (e) not permit any additional liens or encumbrances on the Property without Lender's written consent; and (f) notify Lender promptly of any known or suspected environmental contamination on or affecting the Property.
9. GOVERNING LAW; GENERAL PROVISIONS
This Agreement and the [Security Instrument] shall be governed by and construed in accordance with the laws of the State of [Governing State], without regard to conflict of law principles.
This Agreement constitutes the entire agreement between the parties regarding the Loan and supersedes all prior negotiations and representations. Amendments must be in writing and signed by both parties. This Agreement is binding upon and inures to the benefit of the parties and their respective heirs, successors, and assigns.
IN WITNESS WHEREOF, the parties have executed this Real Estate Loan Agreement as of the Closing Date.
LENDER: [Lender Name]
Signature: _______________________________ Date: _______________
BORROWER: [Borrower Name]
Signature: _______________________________ Date: _______________
NOTARY ACKNOWLEDGMENT
State of [Governing State]
Before me, a Notary Public, personally appeared [Borrower Name], who acknowledged executing the foregoing instrument for the purposes therein expressed.
Notary Public: _______________________________
My Commission Expires: _______________________________
Lender
________________
Signature
Borrower
________________
Signature
What Is a Real Estate Loan Agreement?
A Real Estate Loan Agreement in the United States records the terms on which money is advanced and must be repaid, including default consequences.
Under state real property law, a deed of trust (used in approximately 30 states including California, Texas, and Virginia) transfers bare legal title to a neutral trustee pending repayment, enabling non-judicial foreclosure by trustee's sale in as little as three months after default. A mortgage (used in Florida, New York, and other states) creates a lien on the property without title transfer but requires judicial foreclosure proceedings that can take one to three years or more.
Federal law imposes overlapping requirements depending on the transaction type and the lender's status. The Truth in Lending Act (TILA) and Regulation Z require APR and total interest disclosures for consumer mortgage loans extended in the course of business. Dodd-Frank's ability-to-repay rule requires residential mortgage lenders to verify the borrower's capacity to repay before making a covered loan. RESPA governs settlement procedures and escrow accounts for federally related mortgage loans. Private seller-financed transactions may qualify for exemptions from some of these requirements.
When Do You Need a Real Estate Loan Agreement?
Real estate loan agreements are needed in every transaction where money is lent with real property serving as collateral. The most common private lending context is seller financing, where a property seller extends credit to the buyer instead of requiring bank financing at closing. This enables sales to buyers who cannot qualify for conventional mortgages, at prices or terms that cash-only or bank-financed buyers would not accept.
Family-assisted home purchases frequently involve real estate loan agreements when parents lend down payment money or buy-down funds to help children purchase their first home. For the loan to be enforceable and to satisfy potential mortgage lender disclosure requirements, the family loan must be documented with a promissory note, a recorded deed of trust or mortgage, and a loan agreement specifying repayment terms. An undocumented family loan may be recharacterized as a gift, creating gift tax issues if it exceeds the annual exclusion.
Private hard money lenders who fund real estate acquisitions and improvements for investors, bridge lenders providing short-term financing between a purchase and permanent mortgage, and real estate investors who lend to joint venture partners all require real estate loan agreements with security instruments to protect their invested capital against the risk of borrower default.
What to Include in Your Real Estate Loan Agreement
Property identification must be precise, using the full street address and the legal description from the county assessor's records or title report. The loan amount, interest rate, amortization schedule, and monthly payment amount must be accurately stated. For consumer loans, TILA-compliant disclosures of APR, total interest over the loan term, and total of all payments should be incorporated.
The security instrument provision identifies whether a deed of trust or mortgage will be used (depending on the state), the trustee (for deed of trust states), and the obligation to record the instrument in the county recorder's office at closing. Title insurance should be referenced — lender's title insurance protects the lender against prior liens or title defects not discovered in the title search.
Essential provisions include: the due-on-sale clause restricting assumption without lender consent, escrow requirements for taxes and insurance (protecting the collateral), hazard and flood insurance requirements with the lender as additional insured and loss payee, a late payment provision with grace period and fee, the acceleration clause triggering full balance payment on default, and prepayment terms. Environmental representations (no known hazardous materials on the property), a waste covenant (borrower must maintain the property), and governing state law complete the agreement.
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Forms Legal. (2026). Real Estate Loan Agreement (United States) [Legal document template]. Forms Legal. https://forms-legal.com/usa/financial/loans/loan-agreement-real-estate
"Real Estate Loan Agreement (United States)." Forms Legal, 2026, https://forms-legal.com/usa/financial/loans/loan-agreement-real-estate.
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title = {Real Estate Loan Agreement (United States)},
year = {2026},
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note = {Free legal document template. Based on Uniform Commercial Code (UCC §3)}
}Frequently Asked Questions
A Real Estate Loan Agreement is legally binding in the United States once the parties capable of contracting sign it with the intent to be bound under Uniform Commercial Code (UCC §3). American contract law, drawn from the Restatement (Second) of Contracts and each state's common law, recognizes a Real Estate Loan Agreement as enforceable when it shows offer, acceptance, consideration, and reasonably definite terms. Courts in the state whose law governs the agreement will hold the parties to its written terms unless a party proves fraud, duress, mistake, unconscionability, or that the subject matter is illegal. A signed Real Estate Loan Agreement carries more evidentiary weight than an oral understanding because the writing fixes what each party promised and reduces later disputes over who agreed to what. To strengthen enforceability, the parties should each keep an original signed copy, date their signatures, and complete every blank rather than leaving terms open to interpretation by a judge.
A Real Estate Loan Agreement may charge interest, but the rate is limited by the usury laws of the governing state, which cap how much a lender can collect on a private loan. Each state sets its own maximum rate, and a Real Estate Loan Agreement that charges interest above the legal ceiling can be unenforceable as to the excess and, in some states, can expose the lender to penalties. For loans between family members, the IRS sets Applicable Federal Rates that the lender should meet or exceed to avoid the loan being recharacterized as a gift with tax consequences. The Real Estate Loan Agreement should state the interest rate clearly, specify whether it is simple or compound, and describe how payments apply to principal and interest. A loan that charges no interest is permitted, but documenting the rate — even zero — in the Real Estate Loan Agreement avoids later disputes about what the parties agreed and supports the lender's position if the borrower defaults.
A Real Estate Loan Agreement is secured when the borrower pledges collateral — such as a vehicle, equipment, or real estate — that the lender can seize on default, and unsecured when the lender relies only on the borrower's promise to repay. A secured Real Estate Loan Agreement creates a security interest governed by Article 9 of the Uniform Commercial Code for personal property, and the lender usually files a UCC-1 financing statement to perfect that interest and gain priority over later creditors. An unsecured Real Estate Loan Agreement carries more risk for the lender because, on default, the lender must obtain a court judgment before reaching the borrower's assets. Collateral lowers the lender's risk and often supports a lower interest rate, while unsecured lending typically commands a higher rate. The Real Estate Loan Agreement should clearly describe any collateral, the events that allow repossession, and the steps the lender must follow, because a defective security description can leave the lender unsecured in practice.
A Real Estate Loan Agreement that goes into default gives the lender the right to demand the unpaid balance and pursue collection through the courts of the governing state. The document should define default — typically a missed payment beyond a grace period — and may include an acceleration clause that makes the entire balance due at once if the borrower fails to pay. After default, the lender can sue for the amount owed, and a court judgment may allow wage garnishment or liens depending on state law. Where the Real Estate Loan Agreement is secured by collateral, the lender may also enforce its security interest under Article 9 of the Uniform Commercial Code by repossessing and selling the collateral after proper notice. Claims on a written Real Estate Loan Agreement are limited by each state's statute of limitations, commonly three to six years, so a lender should act promptly. A Real Estate Loan Agreement that spells out late fees, cure rights, and who pays collection costs makes enforcement clearer.
A Real Estate Loan Agreement can be amended after signing when all parties agree to the change and record it in writing. Under general US contract principles, an amendment is itself a contract, so it needs the same mutual assent and, in many states, fresh consideration or a signed written modification to be enforceable. The cleanest method is a dated amendment or addendum that identifies the original Real Estate Loan Agreement, states exactly which sections change, and is signed by everyone who signed the original. Striking through or handwriting edits on the signed original invites disputes about who approved the change and when, so a separate written amendment is the preferred approach. Where the agreement contains a 'no oral modification' clause, only a signed writing will alter the terms, and informal promises to change the deal will not bind the parties. Keeping each amendment attached to the original Real Estate Loan Agreement preserves a complete record of the parties' final agreement.
A Real Estate Loan Agreement does not require a lawyer in most routine situations, and many individuals and small businesses prepare one using a clear written template that covers the standard terms. American law does not condition the validity of a Real Estate Loan Agreement on attorney involvement; what matters is that the parties understand the terms and sign voluntarily. Legal review becomes worthwhile when the amounts at stake are large, the relationship is complex, the parties are in different states, or the agreement involves unusual conditions, tax consequences, or rights that are difficult to reverse. An attorney can confirm the document complies with the governing state's law and tailor clauses such as indemnification, dispute resolution, and termination. For straightforward matters, a carefully completed Real Estate Loan Agreement from forms-legal.com gives the parties a solid written record; consulting a licensed attorney remains the safer path whenever the consequences of a mistake would be costly or hard to undo.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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