Deed, Mortgage & Note

The Deed, Mortgage and Note are the most common documents used in a Real Estate transaction in Pennsylvania. The Agreement of Sale is a temporary document that gets you to the closing where these documents are signed. At closing the AOS is now done but these documents survive closing. (Cash transaction would just have a Deed) It is important to understand what each does and what options you have.

DEED:

    The Deed is a legal document signed and sealed and delivered to effect a transfer of property and to show the legal right to possess it. (also known as Title and sometimes Indenture).

Who signs the Deed?  The old owner (the grantor) to the new owner (the grantee).  OWNERSHIP (all owners sign)

Are there different types of Deeds? Yes, the most common would be General, Special Warranty and Quitclaim. A quitclaim deed gives up any rights or interest that person may possess, this type would most often used with a divorce. Special Warranty deeds are the most common in PA. A special warranty deed warrants only the time that a Grantor was in possession. A General Warranty Deed warrants the Grantor and all previous owners to the beginning of time and is rarely used. The type of warranty is a matter of degree that a Grantor provides for the delivery of title and should not be confused with Title Insurance which covers your title interest.  For more info  “Title Insurance”  

Can I Put My Mom on Title? 

Can I remove my X from Title?

Why did I get hit with Transfer Tax? 

Can Title be held in a TRUST?

 MORTGAGE:

   The Mortgage document is an agreement between the Owners and the Lender that gives the Note holder a security interest in the property. Unlike a car loan you have title to the home with the  Deed. The Deed and the Mortgage will be recorded to let the world know… it’s public information. The Mortgage is basically what ties your home (collateral) to the Note (loan). This document allows the Lender to Foreclose (gain title) in order to sell the asset (your house) to recoup the money owed from the Note (loan).
NOTE: You actually give a mortgage to the Lender. When people talk about getting a Mortgage they are really thinking of the Note.

 Who signs the Mortgage?  All owners… if you are on the Deed you must also sign the Mortgage. As an Owner you must agree to allow your property to be used as collateral for the Note.

NOTE:

    The Note document is a promises to repay the loan. (IOU) The Note will contain all the pertinent information about the loan; Loan Amount, Term of the loan, Interest rate, Terms of Repayment and any applicable changes that may occur such as interest rate, balloons, etc.

Who signs the note?  The person or persons responsible for repayment of the loan. For example, A husband and wife purchase a come, the husband had a previous bankruptcy making him ineligible for financing because of credit. (to use someones income you must also use their credit). The wife’s income and credit were acceptable to qualify for the loan. The husband and wife could be on the Deed and the Mortgage but the wife could sign alone on the Note. Some investors partners and couples alternate signing the notes on different properties so that only half the loans show against each person.

The next section we will review the HUD1 Statement. This is the standard form for all closings and will show the breakdown and your final numbers.

“HUD1”

 

 

5 thoughts on “Deed, Mortgage & Note”

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