A Deed of Trust is much like a mortgage, which one would take out on their home. The Deed of Trust can either be placed on the home before occupancy if you need to borrow money for the actual purchase of the house, or after you purchase the home if you find yourself in financial difficulties. Most use the terms Deed of Trust and mortgages interchangeably, but the fact is that these methods are different and come with different terms and jargon.
The biggest difference between a Deed of Trust and mortgage is that a Deed of Trust uses three parties and a non-judicial foreclosure method.
The three parties involved in a Deed of Trust are the Trustor, Trustee, and Beneficiary. The Trustor will be you, the home owner, the one that will borrow the money. The Beneficiary is the lender and the Trustee is the third party that holds the title to the home. The Trustee is not like with a the mortgage where the home owner is responsible for holding the title.
Foreclosure is a heavy term thrown around now a days and means that the mortgage or Deed of Trust payment has gone into default and that the lender can now take the home. With a Deed of Trust the foreclosure process is easier and quicker since it does not use the court. It is a non-judicial foreclosure. The lender may choose to file a suit against the borrower, but this takes far more time and money.
A Promissory Note is something that is signed through the Deed of Trust process. The promissory note is exactly what it sounds like, a document with a promise to pay the debt signed by the borrower. This is a legal document and can be used in the courts if the payments should go into default. The promissory note will contain the conditions of the loan such as interest rates and payment plans along with other important information.
The fact is the Deed of Trust form is full of technical terms and lingo that may seem dizzying. When you find yourself faced with a situation where you may not understand what it is you are about to sign then sit back and start asking questions, never sign a document that you unsure of.
It is possible to download the forms of a Deed of Trust so you can study the document. Then you can stride into a lenders office knowing exactly what the document means and what you need in the agreement. Researching and doing your homework regarding the terms about the Deed of Trust is the first line of defense against being scammed.
Deed of trust forms are needed anytime there is a mortgage transaction resulting in a deed of trust. A deed of trust is different than a mortgage in that there is a trustee involved. The trustee is usually a title insurance company that ensures there are no other liens on the property and holds the deed until the loan is paid. Deed of trust actually involves three parties: the trustor (borrower), the beneficiary (lender) and the trustee. There are specific deed of trust forms that must be filled out for the transaction to be legal.
Deed of trust forms must include the amount of the loan, the parties involved in the transaction, the legal description of the property being used as security, the start and maturity dates of the loan, any requirements of the loan and signatures of all involved parties. When the deed of trust forms is signed by all parties, they must be signed in the presence of a notary public so they become legal. The forms are then held by the trustee until the loan is paid in full. It is important that the forms be in compliance with the state the property is located. Another detail that can not be overlooked is the accuracy of the documents. The spelling of the involved parties as well as the legal description of the property must be accurate to the letter.
There have been incidents where banks and lending institutions have attempted to take the lenders to court for defaulting on their loan agreements. Some of these incidents feel through for the lending institutions because there was a small misspelling of the legal description or name of the parties and the lending institutions could not collect on their debt. In some circumstances, the court determined that the bank did not even hold a lien on the property because of these discrepancies. So, it's very important that the documentation be very accurate.
Deed of trust forms can be obtained through a law office, public records office, a title company, lending institution or on the internet. There are many sites online that offer you free legal forms including the deed of trust forms you may need for your real estate transaction. Always make sure that they are for the state of the real estate transaction as the laws change from state to state. For the forms to be accurate and legal, they must be in compliance with the state real estate or lending laws. Nothing would be worse than thinking you are holding security on property only to discover you have no legal claims whatsoever.
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