As you’re likely aware, there are a lot of documents that you can expect to have passed in front of you at your Arizona real estate closing.
If you are using a mortgage loan to finance your new home, one of the most important documents you’ll sign at closing is a promissory note.
What is a promissory note?
In the context of real estate, a promissory note is a written agreement in which a homebuyer agrees to repay the lender a specific sum of money over a set time.
Homebuyers generally enter into these legally-binding agreements with their lenders since they’re the ones putting up the funds for the purchase. “Promissory notes” are usually secured by real property.
Your promissory note should detail your interest rate, the amount of your monthly payment, how long it will take to pay off the loan and what happens if you default on your payments in the future.
Mortgage lenders aren’t the only ones to use promissory notes as part of the residential real estate process. Promissory notes are also used in owner-financed property sales, since the seller essentially takes the place of the bank.
What to know about the gravity of promissory notes
Because the promissory note is so important, you need to make sure that you completely understand its terms (and that the document correctly reflects your agreement) before you sign. That’s why it’s often wise to have experienced legal assistance throughout the homebuying process.