What document is traditionally signed at closing to formalize the loan agreement?

The promissory note is the document that is traditionally signed at closing to formalize the loan agreement. This written promise outlines the borrower's commitment to repay the loan under specific terms, including the amount borrowed, interest rate, repayment schedule, and any applicable penalties for late payments. Signing the promissory note is crucial, as it serves as legal evidence of the borrower's obligation to pay back the lender, making it a fundamental component of the mortgage closing process.

While the deed of trust plays an important role in securing the loan by providing the lender a claim against the property in case of default, it is the promissory note that directly reflects the borrower's promise to repay. Other documents, such as the mortgage application, provide background information and establish the borrower's creditworthiness, and the closing disclosure outlines final loan terms and costs, but neither of these formally creates the loan obligation in the same way that the promissory note does. Thus, the promissory note is essential for legally binding the borrower to the repayment of the loan.