Interested in owning Property? You need to know about these key documents!
You have decided to become a property owner but you are not quite sure what are the key documents that need to be in place after you have bought the property. In addition, you don’t have enough money to pay cash for the property so you will be getting a loan from the bank. You plan to pay the loan back over a 30-year period. When the purchase transaction is finished, here are the documents need to be in place.
Deed
The main entities involved are the owner, the bank and the property itself. To a lesser degree, the county courthouse is also involved. The owner (you) want proof that you and only you own the property. This is accomplished by receiving a “Deed” to the property. The most common deed and the one that provides the greatest protection is called a “General Warranty Deed” or Warranty deed. There are several other types of deeds. These include a Special Warranty deed, Bargain and Sale deed, Quitclaim deed etc. They will offer less assurance that you and only you own the property and that there are no other claims on the property.
The Title Company that you use when purchasing the property will research the property records looking for a clear chain of title to the property. They will also look for liens and encumbrances against the property. Once their research is completed, the Title company will issue a Title Insurance Policy to the new owner, that they are receiving a good title to the property as expressed in the “Deed”. It is strongly recommended that the new owner purchase and receive this Title Insurance Policy. Remember, the Deed is the document that provides proof of ownership.
Mortgage
As the new owner, you will want to obtain a loan from the bank to pay the existing owner for the house. You will then be required to pay the bank pack the money you borrowed. Two additional documents will be created. The first is the Mortgage or Mortgage Deed of Trust. It is a voluntary lien on the property. It gives the lender the right to take the property if the borrower fails to repay the loan. In Illinois, the Mortgage or Mortgage Deed of Trust conveys qualified title to the lender as security for the loan during the existence of the debt.
Promissory Note
The second document that is created is a Promissory note. This is the buyer’s personal promise to repay a debt according to agreed to terms. Basically, it is the document that lays out the terms and conditions of the loan.
In summary, the three key documents that should be in place after the sale is complete are the Deed (preferably a “Warranty Deed with a Title Insurance Policy”, The Mortgage or Mortgage Deed of trust, and the Promissory note. The Deeds provide proof of ownership. The Mortgage provides security to the lender by allowing the lender to take the property if the borrower does not pay the debt as agreed to. The Promissory note documents the terms that the mortgage is to be paid back with.
The documents that put a claim on the property need to be stored in a public place. Of the three documents listed above, the Deed and the Mortgage each put a claim against the property. These documents are stored at the courthouse in the county that the property is located in. They are filed under the property identification, not the owner identification. These documents are public and visible to anyone who wants to see them. You can find them by searching the property records at the courthouse. These are the files that are searched when a Title Company is searching the property records to assure that the chain of title is good and that the Deed that you receive is good.
Hopefully, this blog gives you an overview of the key documents. When purchasing Real Estate, it is strongly recommended that you use an attorney skilled in Real Estate, use a Title Company, and utilize a reputable bank. Doing this will help make sure you have a successful purchase.