Promissory Note or Deed of Trust

A Promissory Note is a written Agreement (a Promise in writing) that the borrower  will pay back the owed money to the Lender including Principal and Interest within an agreed time frame and in specific periodic installments. A Mortgage Promissory note is also known as a Mortgage Note, Home Loan Note or simply a Note. A Promissory Note is recorded along with a Mortgage Deed that creates a Lien on the Property. The Following States use a Deed of Trust rather than a Promissory Note:

Alaska, Arizona, California, Colorado, Idaho, Maryland, Mississippi, Montana, Nebraska, Nevada, North Carolina, Oregon, Tennessee, Texas, Utah, Virginia, Washington and West Virginia

Whether a Promissory Note or a Deed of Trust, the borrower needs to make timely payments on the loan till the entire loan is paid in full either to an Individual or a Lender. 

The main difference between a Promissory note and Deed of trust is that a Promissory note only includes two parties, the Lender and the Borrower. The Deed of Trust includes a third party, "The Trustee" that holds the title to the property till the loan is paid off. In case of initiating a foreclosure, the trustee initiates the foreclosure process. 

States that require Deed of Trust, Non-Judicial foreclosures are typical in those states. If the Deed of Trust includes "Power of Sale Clause", the Lender can foreclose without going to court. The State Law lays out the non-judicial foreclosure procedure. Non-Judicial foreclosures are quicker than Judicial foreclosures. 

Click to view a Sample Promissory Note

Related Topics:                   The Loan Estimate (LE)                 The Closing Disclsoure (CD)               Truth in Lending Disclosure (TIL)                   The Loan Estimate (LE)                The Closing Disclsoure (CD)               Good Faith Estimate (GFE)                    What are Jumbo Loans?            Conventional Loans           FHA Loans             VA Loans             USDA Loans          An Adjustable Rate Mortgage             A Fixed Rate Mortgage            Construction Loans             Graduated Payment Loans                What is Fannie Mae                What is Freddie Mac                      What is Ginnie Mae        


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