So, you have decided to buy a home in the great state of Arizona. Expect to sign your John Hancock to several documents. The is one you may not be too familiar with. In this article, you will learn all about what a deed of trust is used for.
Buying a home is one of the biggest decisions you will ever make. Information will be thrown at you right and left, and there are numerous documents you will need to sign. In many states, homeowners will use a mortgage for their property loan, but in other states, deeds of trust are more common. In Arizona, you will most likely use a deed of trust. Although mortgages and deeds of trust serve the same purpose, there are significant differences that all prospective buyers should be aware of before buying their home.
The deed of trust and mortgage are both executed and recorded in the county the property is located. They are both the same as in the property is used as collateral for the loan. Also, any future buyer will need to pay off the loan whether it is a deed of trust or a mortgage, and on a deed of trust, they will receive the deed of trust.
A mortgage operates in the same way in Arizona. One difference between the two documents is the parties involved. In a mortgage, there are only two parties: the borrower and the lender. The lender is typically a bank or private money lender. When a deed of trust is used there are three parties involved: the trustor, the trustee, and the lender. The trustee holds the title to the deed until the loan is paid off. Generally, the trustee is a business such as a title company or escrow company or individual such as an attorney. The trustee and the lender typically work together. In the case of a foreclosure, the trustee will be the party to begin foreclosure proceedings at the request of the lender.
The biggest difference between a mortgage and a deed of trust is foreclosure
What happens after a borrower defaults on a loan is called foreclosure and serves as the biggest difference between the two loans. Under Arizona law, a mortgage can only be foreclosed judicially which means in a court of law. That means a lawsuit would have to be filed and won to allow the lender to sell the property. This can be a lengthy and expensive process.
Deeds of trust, however, can be foreclosed with judicially or nonjudicially according to Arizona state law. Nonjudicial foreclosures only require recording a Notice of Trustee’s Sale which includes waiting at least 90 days and then legally selling the property.
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About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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