What is a Deed of Trust?

A "deed of trust" can be a confusing term because there are "grant deeds", "quit claim deeds", "warranty deeds", etc. 

A deed of trust is simply the legal document that a lender has you sign to secure its loan with you to purchase real property.  More specifically, when you borrow money you will sign a promissory note.  The promissory note says that the lender promises to lend money and you agree to pay the lender back.  If you do not pay the lender back, the deed of trust says that it can sell your house in order to get repaid.  In other words, they can foreclose on the house. 

Thus, at the time you borrow money to purchase a home, the title company will likely record a "grant deed" -- giving you title to the house -- along with a "deed of trust" -- securing the lender's promise to loan you money.

A deed of trust usually has three parties: 1) the "trustor", who is you, the person who owns the property.  2) the "trustee", a third party person or entitly who is granted power to foreclose and reconvey the promissory note; and 3) a "beneficiary", which is the lender who loaned money to purchase the property. 

Ken Jorgensen, California Attorney
www.fresnolawgroup.com


Photo credit: http://www.flickr.com/photos/alancleaver/