Article - Ownership Documents
Colonial Beach Realtor
a division of Treck Realty
Purchasing a home is a significant milestone, accompanied by a plethora of paperwork that can often be confusing for many buyers. Understanding the essential documents involved in buying a house, especially with a loan, is crucial to navigate this process smoothly. Today, as I completed the purchase of another property by the beach, a conversation with the lawyer illuminated the complexity and importance of these documents. Here’s a breakdown of the three key documents you'll encounter when buying a home with a loan:
The Deed:
This is the document that officially transfers ownership of the property to you. It's a critical piece of paper that signifies you are the owner of the house. Note that the name on the deed can be different from the name on the loan note.The Note:
Also known as the promissory note, this document outlines the details of the loan agreement, including the amount borrowed, the interest rate, repayment schedule, and the consequences of failing to make payments. The person named on the note is responsible for repaying the loan, and this name can be different from the one on the deed.The Deed of Trust:
This document is filed with the local courthouse by the title company and serves as a lien against the property, indicating that there is a loan against it. The names on the deed of trust and the note must match. It's worth noting that sometimes, the release of this lien is not properly recorded at the courthouse once the loan is paid off, but that's a topic for another discussion.
If you purchase a home without a loan, i.e., with cash, the only document involved is the deed.
This information highlights an interesting aspect of real estate transactions: it's entirely possible to own a home without having your name on the mortgage. This situation can arise in several ways:
Inheritance:
If a loved one passes away and you inherit the property, the deed can be transferred to your name while the original mortgage remains under the deceased's name. Banks cannot compel you to refinance into your name under these circumstances.Divorce:
During a divorce, one spouse may be granted the house through a specific deed transfer pursuant to the divorce agreement. Opting for a quitclaim deed in such cases might trigger tax implications.Deed Transfer:
It's possible to sign over the deed to someone else while keeping the loan in your name. I did this for my daughter, transferring the deed to her name while the mortgage remained under mine. She makes the mortgage payments, but legally, I'm still responsible for the loan.
Understanding these distinctions and how they apply to your situation can help demystify the home-buying process, ensuring you're well-informed about the implications of each document you sign. This knowledge is not just about legal formalities; it’s about ensuring that your rights and responsibilities as a homeowner are clearly defined and protected.