Financing and Mortgages
Instruments and theory
The note is the promise to pay; the mortgage is the security instrument that pledges the property. Massachusetts is a title theory state: legal title rests with the lender until the mortgage is discharged, while the borrower keeps equitable title and the right of redemption. Massachusetts forecloses by power of sale, not judicially. For owner-occupied residential mortgages, a 90-day right to cure must be given before foreclosure, and notice of sale must be published in the required manner.
Loan basics
Know fixed versus adjustable rate loans (index, margin, caps), PITI, escrow or impound accounts, points, and APR. FHA loans allow low down payments with mortgage insurance; VA loans offer no-down-payment financing to eligible veterans; conventional loans above 80 percent loan-to-value usually carry private mortgage insurance, which the servicer must cancel at 78 percent LTV and the borrower may request canceled at 80 percent. Lien priority generally follows recording order, with purchase-money mortgages and subordination agreements as important exceptions. Due-on-sale clauses limit assumptions. RESPA prohibits kickbacks and unearned fees; TRID requires the Loan Estimate soon after application and the Closing Disclosure at least three business days before closing.
Traps
'APR equals the note rate' (false); 'Massachusetts requires court foreclosure' (false); 'PMI stays for the life of the loan' (false); 'Recording order never matters' (false).
Rule of thumb
If loan-to-value is 80 percent or less, expect no PMI; above 80 percent, expect it until the cancellation thresholds are reached.