There are so many documents to sign and review when you buy a house that you may feel overwhelmed. The average home buyer doesn’t even look over all of the documents, let alone have a professional review them to check for issues.
The end result may be that you sign documents without knowing what they mean or even what the documents themselves do. For example, you may have both a mortgage note and a promissory note in that package of documents. What is the difference between the two?
The mortgage note includes the terms of the loan
Your mortgage note is a detailed document outlining the specific obligations of you to the lender and the lender to you. The details in this document will include the total amount of the mortgage, your interest rate, your repayment period and other important terms. For example, whether or not you have to pay a prepayment penalty or if the how old is subject to a variable interest rate should be clearly spelled out on the mortgage note.
A promissory note discusses the process of loan repayment
Provided that the property you intend to buy is in Illinois and not a vacation home in another state, you will typically not have a promissory note separate from your mortgage note because of the deed requirements in Illinois. However, if you buy a property in Wisconsin or Michigan, there may be a promissory note discussing the terms of loan repayment in addition to the mortgage note.
Learning about the documents used during a real estate closing can help you prepare to review and sign those documents.