A broker in Evansville is explaining Indiana's mortgage system to a client who recently moved from Texas, a deed-of-trust state. The client asks what the key difference is between a mortgage used in Indiana and a deed of trust used in Texas. Which of the following best describes the correct distinction?
Correct Answer
C) A mortgage is a two-party instrument creating a lien, while a deed of trust is a three-party instrument that conveys legal title to a trustee
A mortgage is a two-party instrument between the borrower (mortgagor) and the lender (mortgagee) that creates a lien on the property as security for the loan. A deed of trust is a three-party instrument involving the borrower (trustor), the lender (beneficiary), and a neutral third-party trustee who holds legal title to the property on behalf of the lender. Indiana uses mortgages, which require judicial foreclosure because there is no trustee with power-of-sale authority.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
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.
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