Under Alabama law, which document serves as the primary security instrument when a borrower obtains a loan to purchase residential real estate?
Correct Answer
A) A mortgage creating a lien on the property in favor of the lender
Alabama uses the mortgage as its primary security instrument for residential real estate loans. Under Alabama's lien theory, the mortgage creates a lien on the property in favor of the lender (mortgagee) while the borrower (mortgagor) retains legal title. This is established under Code of Alabama §35-10-1 et seq. and is a fundamental characteristic that distinguishes Alabama from deed-of-trust states.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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- → A Utah property has both a first mortgage and a second mortgage. If the first mortgage is foreclosed, what happens to the second mortgage?
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