What Should I Be Aware Of When Obtaining A Property Loan?

When obtaining a property loan, it is important to ensure prior to closing that the documents accurately reflect the terms of the loan, including the interest rate and the length of repayment term of the loan (e.g. 10 years, 15 years or 30 years). People don’t always realize that there is usually a promissory note that they sign that personally commits them to repay the money they’re borrowing. They will also execute a deed of trust which creates a lien on the house and makes it so that if they fail to make payments on the loan, the bank can foreclose and take title to the property.

A deed of trust is not a document that people see in everyday life, so many people don’t understand its terms. Generally, three parties are involved: the borrower, the lender, and the trustee. The trustee is essentially holding the bare legal title to the house and can at the direction of the bank foreclose in response to the borrower failing to pay the loan or to perform any of the obligations in the loan documents. A deed of trust usually includes a due-on-sale provision that essentially allows the bank to make the loan payable in full if the title to the property is transferred without the bank’s permission. It’s also important for people to be aware of the fact that late charges (typically five percent of the payment amount due) might be billed if payment is five to 10 days late.

Is Escrow Always Necessary?

Escrow is definitely necessary if the buyer is obtaining a loan because the bank will not give the loan money directly to the buyer; they deposit the funds in escrow in order to ensure that the title has been transferred and that the bank’s lien is in the correct position on the property before the money is disbursed. Further, a seller will not convey the title to the property to buyer unless they know the buyer is in a position to pay the purchase price. The deed will be put in escrow with instructions that dictate that it cannot be delivered to the buyer until the buyer deposits the funds to pay the purchase price. This is an essential tool that inserts an independent third party in the transaction to ensure that the bank, the seller and buyer’s interests are correctly addressed in the closing process.

In some states such as New York, escrow is handled only by attorneys, so the attorneys are a little more involved in the closing process than they are here in Washington, where an independent escrow company might handle the closing process and exert limited authority from the state supreme court to complete legal documents without the help of an attorney.

For more information on Obtaining A Property Loan In Washington, expert assistance is your next best step. Get the information and legal answers you are seeking by calling us at (360) 323-2885 today.