When it comes time to close on a home loan, whether a purchase loan or a refinance loan, a borrower will be asked to sign several documents.  The loan application, the Good Faith Estimate, the Privacy Policy, loan transfer and servicing disclosure are some of the ‘standard’ documents that will be signed by a borrower.

However, the two most important documents considered are the NOTE and the Mortgage [for Kansas properties] or Deed of Trust [for Missouri properties].  The Note and the Mortgage / Deed of Trust are standard FANMAE forms, used by all mortgage brokers, bankers and lenders.  While many borrowers will confuse these documents and their purposes, here is a brief explanation of these two documents.

The Note:
The NOTE is the form which says that a borrower will pay back the loan and the obligation of that debt.  The NOTE will show the terms of the loan, any changes that might exist, and will be signed only by the person responsible to pay back the loan!

The Mortgage / Deed of Trust:
Better known as a ‘security instrument’, this is the document that is recorded at the county courthouse.  The purpose of the ‘security instrument, whether it is the Mortgage or Deed of Trust, is to make known as public record a lien that exists against the property.
All ‘owners’ of the property will sign either a Mortgage or Deed of Trust.  The reason for the signatures of all owners of the property is to acknowledge that a lien [or debt] does exist against the property.  The ‘security instrument’ further states that if the debtor of the NOTE [whether a single individual or many individuals] default on the payment of the note, that the owners of the property acknowledge that the foreclosure proceedings can proceed, if necessary.