Texas Real Estate State Practice Exam

In Texas, what does a lender have while the borrower has title?

1. Mortgage

2. Deed

3. Liability

4. Lien

The correct answer is: Lien

In Texas, when a borrower takes out a loan to purchase a property, the lender holds a lien on the property while the borrower retains the title. A lien is a legal right or interest that a lender has in the borrower's property, which serves as security for the repayment of the loan. This means that if the borrower defaults on the loan, the lender has the right to enforce their lien, allowing them to potentially foreclose on the property to recover the outstanding debt. In contrast, while a mortgage and a deed are often associated with such transactions, they serve different purposes. A mortgage is a type of lien but is not the only form of security interest; it represents the borrower's promise to repay the loan. A deed, on the other hand, is a legal document that transfers ownership of the property to the buyer. Liability refers to the borrower's responsibility for repaying the loan, but it does not convey any ownership or security interest in the property. Thus, the relationship between the lender and borrower is appropriately defined by the existence of a lien in favor of the lender while the borrower holds the title to the property.