Maria is a licensed real estate salesperson in Iowa helping a buyer client understand the financing process. The buyer asks whether a trustee will hold title to their property during the loan repayment period, as was the case when they purchased a home in Arizona. What is the most accurate response Maria should give?
Correct Answer
B) No, Iowa uses mortgages, so the borrower retains title while the lender holds a lien on the property.
Iowa is a mortgage-lien theory state. Under Iowa law, when a borrower takes out a mortgage loan, the borrower retains legal title to the property, and the lender receives a mortgage lien as security. This differs from deed-of-trust states like Arizona, where a trustee holds title. Iowa does not use deeds of trust, so no trustee holds title during the loan period.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
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