Financing
This topic covers how buyers finance real estate, including notes and security instruments, the parties to a deed of trust, and the major federal lending laws.
Notes, Mortgages, and Deeds of Trust
A borrower signs a promissory note to repay and a security instrument to pledge the property. A mortgage involves two parties (borrower and lender); a deed of trust involves three, with a neutral trustee holding title as security and able to conduct a nonjudicial foreclosure. Key clauses include acceleration, alienation (due-on-sale), and defeasance. On default the lender may foreclose to recover the debt.
Loan Programs and Federal Laws
Loans may be conventional or government-backed (FHA-insured, VA-guaranteed). Payments often bundle PITI. Federal consumer laws include the Truth in Lending Act (APR and finance-charge disclosure), RESPA (settlement cost disclosure and prohibition of kickbacks), and the Equal Credit Opportunity Act (prohibiting discrimination in lending). These laws promote transparency and fairness in credit.