Purchasing a property requires specific legal documents to be signed and recorded properly. A house can have many owners over its lifetime. The various transactions between the sellers and buyers are compiled together to form the title or title report. When a mortgage is used to finance the purchase of a property, the borrowers' names will appear on the title. However, later down the road those borrowers can add or remove other people to the title by using deeds. Just as the names on a house's title and mortgage can be slightly different, so are the responsibilities each person holds.
When a mortgage loan is used to purchase a house, the property acts as collateral to secure the loan in the lender's interest. The lender solidifies this by requiring the borrower to sign a security instrument. This is called a mortgage or a deed of trust depending on the state the property is in. The borrower agrees to all of the lender's terms and conditions and agrees to repay the loan as requested by signing the mortgage. Once this is finalized, the borrower is indebted to the lender for the loan amount until it is paid in full. The mortgage document is filed on public record and creates a lien on the property, which is removed once the loan is paid off.
Transfer of Ownership
A deed is also prepared for the seller to sign. The borrower on the mortgage is listed as the grantee on the deed and the seller is the grantor. The seller transfers his ownership rights to the buyer through this deed. A general warranty deed or special warranty deed completes this transfer when a property is purchased. After the transfer is complete the deed is recorded and the grantee -- or buyer -- now owns the property or is considered to hold the title. Real property owners are responsible to pay property taxes to the proper jurisdiction.
Using a Cosigner
If a cosigner is used to obtain the mortgage loan he must sign the documents provided by the lender. However, his name is not included on the mortgage instrument or as a grantee on the deed. Therefore, a cosigner is financially responsible for the loan, however, he doesn't have any ownership in the property. If the borrower defaults on the loan, the lender attempts to collect from the cosigner. The mortgage loan is included on the cosigner's credit report as debt.
Property owners may need to add or remove individuals as titleholders over time. An example of this might be due to a marriage or divorce. This is accomplished by using a quitclaim deed. This type of deed is generally used when property is not actually being purchased but to just make changes. Granting someone else ownership to the property via a deed does not make them financially responsible for the mortgage loan. Conversely, removing an owner who is also listed on the mortgage does not remove their financial responsibility. The only way to edit mortgage responsibility is to refinance the loan.
- Escrow Help: What Is The Difference Between A Mortgage And A Deed of Trust?
- Bankrate.com: Understanding Quitclaim, Warranty Deeds on Property
- US Legal: How Would I Add Someone to the Deed of My Home?
- FHA.com: The Difference Between a Co-borrower and a Co-signer
- FHA.com: FHA Streamline Refinancing Rules for Adding/Removing Borrowers