NMLS UST Mortgage Practice Exam 2025 – Complete Prep Guide

A promissory note serves as evidence of a promise to pay, which is central to its function in a loan agreement. It is a legal instrument where one party (the borrower) commits to repay a specified sum of money to another party (the lender) under agreed-upon terms, such as interest rates, payment schedules, and maturity dates. This document is not just a simple acknowledgment of debt; it is a binding contract that establishes the borrower's obligation to repay the loan and outlines the conditions of repayment.

The nature of the promissory note is such that it facilitates the lending process, providing lenders with a form of security regarding the borrower’s commitment to fulfill their financial obligations. It is important to understand that while this note is crucial for documenting the borrower's commitment, it does not provide security for repayment; that role is typically filled by a mortgage or deed of trust.