Understanding home financing is important when you are learning how to buy a house in Idaho. Most people cannot effort to pay cash for their new home. So if you are looking for financing, you are not alone. A majority of homes in Southeast Idaho have a loan with a deed of trust. Here are a few things you need to know about home financing.
Unless you can pay cash for your new home, or secure owner contract financing, you will need to get a home loan to buy it. With a home loan, you borrow money from a lender and agree to pay it back over time. The loan is secured with a deed of trust or mortgage. Home loans benefit the lender because they charge the borrower fees and interest. Home loans help home owners because they can live in the home while paying for it. The contract between the lender and home owner outlining the terms of their agreement is a loan. There are may types of loans in Idaho. One important part of a loan is defining what happens if the borrower does not pay the loan back as agreed. Idaho uses a deed of trust for this purpose.
A deed of trust is an agreement between the lender and the home owner. Lenders don't like to lose money. One way they reduce their risk is through collateral. Collateral is something of equal value to the loan that the homeowner will lose if they don't pay. Usually the property itself is the collateral in a home loan. The agreement between the home owner and lender to secure the loan is a deed of trust.
There are three parties to a deed of trust. They are:
Here is how it works. The beneficiary (lender) says to the trustor (the borrower), "I will loan you money to buy your house in Rexburg. When you buy the house, title will go into the name of the trustee (third party). When you pay me back in full, the trustee (third party) will transfer the property into your name."
A deed of trust protects the lender. If the borrower stops payment on the loan, the trustee can sell the property and pay back the lender. They can do this because they hold legal title. The deed of trust also protects the home owner. As long as payments are current, the home owner holds equitable title. When all payments are complete, the trustee must transfer legal title by law. Equitable title and legal title then become title. When payments become delinquent, foreclosure in Idaho is the process used by the lender to recapture the property.
Loan contracts and deeds of trust are the foundation of financing a home. They provide security for lenders and confidence for borrowers. With an understanding of loans and deeds of trust, the next step is finding a loan that works for you. There are many types of lenders and many types of loans. Lenders in Rexburg, ID can help you finance your next home.