Idaho Real Estate Practice Exam

A home buyer wishes to get a loan for a home on 5 acres. What security instrument may the lender use in Idaho?

1. Promissory note

2. Loan guarantee

3. Mortgage

4. Trust deed

The correct answer is: Mortgage

In Idaho, the correct security instrument that a lender may use for securing a loan on a home and real property, including 5 acres, is a trust deed. A trust deed, also known as a deed of trust, provides a method for the lender to secure the loan against the property. It involves three parties: the borrower (trustor), the lender (beneficiary), and a third-party trustee. This arrangement allows the lender to foreclose on the property in case the borrower defaults on the loan, similarly to how a mortgage would work, but it is structured in a way that often facilitates a quicker foreclosure process in Idaho. While a promissory note is an agreement to repay the borrowed money, it does not provide the lender with security in the property itself. A loan guarantee offers assurance that the borrower will pay back the loan, often through another party, but does not involve real estate security. Therefore, the trust deed serves as the appropriate and necessary legal instrument in this context for securing the loan against the buyer's property.