Promissory Notes and Loan Agreements

Promissory Notes and Loan Agreements Attorney

Promissory Notes

Commonly referred to as the “note”, a promissory note is actual evidence of a primary mortgage obligation. As the name suggests, it is a promise to pay a certain sum of money. The note is the security for the debt owed and, in fact, in a residential foreclosure a lender must be in possession of the note to foreclose.

A note can be transferred by assignment. When a note is properly assigned, it gives the assignee (recipient) the advantages of the assignor. If there is a conflict between the language in a note and the language on a mortgage, the language on the note has been known to prevail.

In foreclosure defense cases there are sometimes issues with possession, assignment or reestablishment of a note. It is important to have an experienced real estate attorney helping you defend your foreclosure action. Sometimes, issues with the note can help develop a strong defense. An experienced real estate attorney can help you identify those issues. An experienced real estate attorney can also help you if you have questions about a lost promissory note.

Promissory notes include all of the terms and conditions of a loan but they are not only used to secure a mortgage. Promissory notes can also be used to secure other types of loans.

Not all promissory notes are alike. There are different types of promissory notes including: fixed, variable and balloon. A fixed promissory note has an interest rate that does not change. A variable promissory note has an interested rate that can fluctuate depending on the market. A balloon promissory note has a low interest rate but the final payment is usually more than twice the amount of the monthly periodic payment.

Contact a real estate attorney at NeJame Law today for questions and inquiries about your promissory note.

Loan Agreements

A loan agreement is the contract between the borrower and the lender. A promissory note will contain all of the terms and conditions of the loan and the loan agreement will also contain this information. The borrower and the lender will both sign the loan agreement while a promissory note generally only contains the signature of the borrower. It is important to have an attorney to review the contents of your loan agreement. Not every real estate transaction is the same and so it is crucial to have a loan agreement that details the terms and conditions that are important to you. An attorney will make sure that your legal interests are protected and that any potential legal issues are brought to your attention and competently dealt with.

Residential Loan Agreements - There are different types of Residential Loan agreements including: FHA, VA, Conventional, Jumbo and Private.

  • FHA: an FHA loan is a loan that is insured by the US Federal Housing Administration. FHA loans are attractive options for some buyers because they are easy to qualify for. The government guarantees that they will pay the loan if the borrower defaults, so lenders are likely to approve buyers for these types of loans. FHA loans also required a lower down payment than other loans. Instead of having to make a 20% down payment, buyers that qualify for FHA loans can usually put down as little as 3.5%.

    Types of FHA Loans include, Fixed Rate FHA, Adjustable Rate FHA, FHA Secure Refinance Loan, FHA Reverse Mortgage, Energy Efficient Mortgage, Graduated Payment Mortgage, Growing Equity Mortgage and FHA Condominium Loans. For more in formation on FHA Loans, contact a Real Estate Attorney at NeJame Law today.
  • VA: a VA loan is a mortgage loan that is insured by the US Department of Veterans Affairs. These types of loans are available to buyers who are currently serving or who have previously served in the US military. VA loans require little or no down payment and so they are attractive options for the buyers who qualify.
  • Conventional: Conventional loans usually require a down payment of 20%. While there are some programs that will allow for a lower down payment, 20% is your typical down payment amount. FHA and VA loans are only offered by certain lenders, but conventional loans are available through almost any lender.
  • Jumbo: A jumbo mortgage is, as its name suggests, a mortgage for a jumbo home. A buyer that is seeking a jumbo mortgage is looking to buy a larger home that costs more than $500,000.00. As you can imagine, to qualify for a jumbo mortgage your credit score must be higher than required for conventional mortgage loans. There are, however, some tax benefits for recipients of jumbo mortgages.
  • Private: private mortgage loans are loans where you borrow from a private business or private person instead of a big bank or mortgage lender. It may be easier to qualify for a private mortgage loan, but you may have higher interest rates or you may have less time to pay back the loan.

 

Commercial Loan agreements - Commercial Loan agreements usually require a personal guarantee and have a higher interest rate than Residential Loan Agreements. A commercial loan agreement is usually a 10 or 15 year term versus your 15 or 30 year term with a residential loan agreement. Types of commercial loans include, private, fixed and variable and they are similar to their residential loan counterpart.