Financing and Settlement
Most purchases involve borrowed money and a formal closing process. This chapter explains security instruments, loan types, and the settlement procedures that transfer ownership and funds, with attention to Arizona's use of deeds of trust.
Security Instruments and Foreclosure
A note is the borrower's promise to repay, while a mortgage or deed of trust secures that debt with the property. In Arizona, deeds of trust are standard: the trustor (borrower) conveys title to a trustee, who holds it for the beneficiary (lender). On default, the trustee can conduct a nonjudicial trustee's sale, which is faster than judicial foreclosure. This process is a defining feature of Arizona financing.
Loan Types and Programs
Conventional loans are not government-backed, while FHA loans are insured and VA loans are guaranteed for eligible veterans. Loans may be fixed-rate or adjustable-rate, and terms like loan-to-value ratio and points affect cost. Federal laws such as the Truth in Lending Act and RESPA require disclosure of loan terms and settlement costs so borrowers can compare offers and understand what they are paying.
The Settlement Process
At closing, ownership and funds change hands, often through a neutral escrow or title company in Arizona. Prorations divide items such as taxes and interest between buyer and seller as of the closing date. The Closing Disclosure itemizes final loan terms and costs and must be delivered to the borrower before closing. Recording the deed and security instrument completes the transaction and establishes priority.