Marcus, a real estate agent in Lexington, Kentucky, is helping a buyer understand the closing documents. The buyer asks what the difference is between the two main documents they will sign at closing related to their mortgage loan. Which of the following best describes the two documents?
Correct Answer
B) The mortgage creates the lien on the property; the promissory note is the personal promise to repay
In Kentucky mortgage transactions, two key documents are signed: (1) the mortgage, which creates a lien on the property as security for the loan (the mortgagor retains title but grants the lender a lien interest), and (2) the promissory note, which is the borrower's personal written promise to repay the debt according to specified terms. These are separate but related documents.
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Related Topics & Key Terms
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Related Concepts
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
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