Loan proceeds are defined as the amount the lender disburses to the borrower after paying off closing fees.

• A. The face amount of the policy
• B. The amount the borrower owes to the lender including interest
• C. The total loan value of the collateral
• D. The amount disbursed to the borrower after paying off any closing fees

Answer: (D)

Loan proceeds are the funds you actually receive at closing after closing costs are covered. In a real estate loan, the lender’s quoted loan amount is the principal, but some closing costs can be paid from those loan funds. The remaining amount disbursed to you is the loan proceeds—the net cash you walk away with after those costs are paid. This is why the option describing the amount disbursed to the borrower after paying off closing fees best matches the concept. The other ideas refer to the policy’s face value, the total debt owed, or the collateral’s value, none of which describe the net cash you receive at closing.