PSI New Jersey Real Estate State Practice Exam

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Which document typically contains the terms of a mortgage loan?

Property deed
Promissory note
Loan application
Home inspection report

The correct answer is: Promissory note

The document that typically contains the terms of a mortgage loan is the promissory note. This legal instrument outlines the borrower's promise to repay the loan to the lender, including specific details such as the loan amount, interest rate, repayment schedule, and the consequences of default. The promissory note is critical not only because it establishes the borrower's obligation but also because it can serve as evidence in a legal setting if disputes arise regarding the mortgage. In contrast, the property deed relates to the ownership of the property itself rather than the loan terms. The loan application is an initial document that a borrower submits to request a mortgage but does not contain the finalized terms of the loan. The home inspection report evaluates the condition of the property and is not involved with the financial terms of the mortgage. Thus, the promissory note is the definitive document that encapsulates the agreement between borrower and lender concerning the mortgage loan's terms.