Legal Question in Real Estate Law in New Jersey

Re: Promissory note question

The reason the mortgage company wants the note and proof the note has been paid is so that your fiance's parents do not record a mortgage on the property.

Re: Promissory note question

Many times a mortgage company will require a gift letter if the down payment is a gift. I don't believe they will be too worried about the repayment of the loan. As long as they are in first position on the mortgage and the home appraisal is good, they will not be concerned.

The note can always be cancelled if the parties agree. The mortgage company will not be involved.

Re: Promissory note question

If the terms and conditions of your loan require you to make a genuine, not a "sham", 10% down payment, then the lender is certainly entitled to insist that the "loan" be repaid prior to closing. If the funds were really meant to be a gift, however, why don't you simply find out from the lender if it would be acceptable to have a gift letter provided?

The concern of the mortgage company is that there will be other loans on the property, and that someone will attempt to foreclose on their secondary loan, thus risking the mortgage company's security.

This is not a problem with a gift. However,other conditions of your mortgage loan probably require that you at least put some of the down payment down from your own personal funds, i.e., it can't ALL come from a gift from your parents.

The bottom line is that attempting to deceive or lie to your mortgage company about any of this is a serious federal crime, and you don't even want to THINK about doing it.