Note

• When you finance a home, you have to sign a document called a note and your lender records the note against the deed. The note includes details of the loan agreement, including the amount of the loan, the repayment period and the interest rate. The borrower must sign the note during the loan closing, and the lender must record the signed note at the county courthouse.
  
  Lenders typically do not require all of the property owners to sign the note. This means that your spouse can finance your home even if your bad credit prevents your name from appearing on the note. However, although the note lists the property address, a note in isolation does not give the lender the right to place a lien on your home.
  
  

Owner

• A lender can only place a lien on your home if you and all of the other property owners whose names appear on the deed agree to sign a document called the security instrument. This document appears in the mortgage package, and you sign it during the loan closing. The precise wording varies from state to state, but when you sign the note, you offer up your home as collateral for the mortgage. This means that if the borrower does not repay the debt, the lender can foreclose on your house and sell it to recover the balance of the mortgage debt.
  
  

Prevention

• If you do not sign on the note, then you have no way of knowing whether the borrower has been repaying the debt. Privacy laws prevent the lender from sharing information with you about the status of the loan even though your name appears on the deed. However, lenders have to notify property owners when foreclosure proceedings begin, so you should receive a letter in the mail or a hand-delivered note from the local sheriff when the foreclosure proceedings begin. As the owner, you have no legal responsibility to repay the debt, but paying off the debt on the borrower's behalf means that you can save your home.
  
  

Considerations

• As a property owner, your involvement with your home and the loan comes to an end when the lender forecloses. At that time the deed transfers from you and the other owners to the lender. The foreclosure appears on the borrower's credit report, and in some states lenders can even sue borrowers if the foreclosure sale does not raise enough cash to settle the debt. The lender cannot sue you as the non-borrowing owner, and the debt does not appear on your credit report. However, if you are married to the borrower who defaulted on the debt, you could suffer financially if the lender successfully sues your spouse and garnishes money from a joint account.