Becoming a property owner requires a lot of paperwork to be signed and documented. When a new property is purchased, a closing occurs. At this closing, dozens of documents are signed. Two very important documents are the deed and the mortgage. These documents are both filed on record with the county's land record system, but they serve two different purposes.
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The deed to a piece of property acts to convey ownership from the sellers to the buyers. Generally, when a home is sold on the market a Warranty Deed is used. The seller signs this deed and provides a guarantee that he is the true owner of the home and has the right to sell the property. Additionally, this warranty provides that if in the future a third party tries to claim ownership, he will provide assistance in resolving the matter. Once a deed is filed properly on record the buyers become the owners of the property.
If a property is bought outright with cash, only a deed and some supporting paperwork needs to be signed. Once the payment is received by the seller, the deed goes on record and the buyers own the property free and clear. If the buyers need to finance the purchase with a mortgage loan, then the buyers must obtain a mortgage loan and agree to the terms with the lender.
The mortgage company will approve an applicant for a mortgage loan based on credit history and income. Once approved for a limit, the property can be purchased using the funds from the mortgage loan. At the closing, the mortgage company provides a set of documents that the buyers must agree to and sign. The actual mortgage, also called a deed of trust in some states, outlines the terms of the loan including the amount, interest rate, repayment length and conditions that could change. Once the borrowers sign the mortgage, they are making an agreement with the lender to pay back the loan amount, plus interest. The mortgage is also filed on record, showing that the buyers are in debt to the lender and will not own their home outright until the loan is paid in full.
Someone named on the mortgage does not always have ownership rights to the home. For example, borrowers may need to use a co-signer to obtain the loan. This co-signer may be a parent or sibling who does not live in the home. The co-signer simply agrees to be on the mortgage and take financial responsibility of the loan. Moreover, someone who does not appear on the deed to the home cannot take out a mortgage loan on that property even if she does live there.
Names can be added and removed from the property title at any time, regardless of the state of the mortgage. Owners who show up on the current title, or deed, can remove someone such as a husband. However, if the husband is listed as an owner of the home, he himself must sign the deed taking his name out of ownership. If multiple owners appear on the deed, one cannot remove the others without consent.
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