Real Estate Financing and Mortgages
Documents and priority
The note is the borrower's promise to pay; the mortgage or deed of trust is the security instrument. Tennessee lenders commonly use a deed of trust with a trustee and power of sale, allowing nonjudicial foreclosure under the deed's terms. Recording establishes priority among liens, generally first to record wins among competing interests with notice. A buyer who “assumes” a loan may be personally liable; a buyer who takes “subject to” is not personally liable but the property remains exposed to foreclosure. Watch for due-on-sale clauses, subordination, junior liens, and tax liens.
Loan types and disclosures
Know conventional, FHA, VA, USDA, fixed-rate, adjustable-rate, amortizing, interest-only, and balloon loans. APR includes finance charges, not just the note rate. Points are prepaid interest or fees; discount points buy a lower rate. LTV = loan ÷ value; PMI is often required on high-LTV conventional loans. RESPA, TILA, TRID, and Dodd-Frank regulate disclosures, escrow, settlement charges, and lending practices. Traps include confusing prequalification with preapproval, ignoring escrow/impound requirements, and assuming a mortgage is the debt itself.
Worked rule
Purchase price $250,000, loan $200,000: LTV = 80%. If the lender requires 20% down to avoid PMI, this loan sits at the threshold. Monthly payment includes principal, interest, taxes, insurance, and possibly PMI/HOA dues. Rule of thumb: note = promise to pay; security instrument = remedy; record the security instrument to protect priority.