When a mortgage loan is used to finance the purchase of a property, the borrower attends the closing meeting to sign the loan documents provided by the lender. Perhaps the most vital document of the entire packet is the promissory note. This document provides evidence that money was borrowed and the borrower promises to repay it as agreed upon. The promissory note must have the signatures of the borrowers responsible for the loan.
A promissory note for a mortgage contains key information -- the parties involved, amount of debt, repayment terms and any applicable clauses. The parties are the lender and the borrower, also referred to as the promisee and promisor. The amount of debt is simply the amount borrowed and the repayment terms state the interest rate and length of the repayment term. The clauses contain important information regarding the collateral, late fees and due-on-sale exceptions.
One or more people can be listed as the borrowers on a mortgage loan. Each person who applies for the mortgage is listed on the promissory note as a promisor and must sign the note. For example, if you purchase a home as your sole and separate property, only your signature needs to be on the note. If you and another person, such as your spouse, purchase a home together, both of your signatures must appear. A notary public will witness the signature and also sign and stamp the note.
If a co-signer is used to get approved for the mortgage loan, he doesn't have the same entitlements as a co-borrower. The co-signer's credit and income are used to approve the loan, but he doesn't actually own the property. If the owner defaults on the loan, the lender can collect from the co-signer. Therefore, the co-signer must also sign the promissory note.
Power Of Attorney
A power of attorney is someone appointed to handle various responsibilities of anther person's life or business transactions. People often elect to use a power of attorney if they have medical issues or they will be out of the country for prolonged periods of time. The power of attorney is legally appointed through a power of attorney document, which should be filed on record. A general power of attorney contract allows for the appointed attorney to buy and sell real estate and conduct other banking transactions. If you're using a power of attorney to complete the mortgage loan process, she will sign the note on your behalf, but the lender will need to verify the power of attorney documents.
Limited Liability Companies or Corporations
Small businesses, such as LLCs, and larger corporations also buy real estate from time to time. Since a sole party won't be responsible for repaying the loan, the signature requirements for these transactions are specific to the company. When an LLC or Corporation is formed, they draft articles to explain the structure of the business and to grant members certain responsibilities. Some of these responsibilities include signing loan documents, and are usually reserved for higher-ranking members of the company. The lender will need a copy of the articles to draft the loan documents. The individuals named will then sign on behalf of the company.
- Law Depot: Promissory Note FAQ
- Expert Law: The Promissory Note
- Mortgage 101: What Is a Mortgage Promissory Note?
- FHA.com: The Difference Between a Co-borrower and a Co-signer
- The 'Letric Law Library: Power of Attorney
- Bankers Online.com: Corporate or LLC Loans – Who Signs the Loan Docs?
- U.S. Small Business Administration: Business Loan Checklist
- George Doyle/Stockbyte/Getty Images
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