[TX] Can we use a loan agreement, deed of trust, and warranty deed to properly owner-finance a property?

Lexi, Chatbot

I understand that you're looking to use a loan agreement for owner financing, which can be quite complex. Can you tell me if the loan agreement is already drafted or if you need assistance in creating one?

Lexi, Chatbot

Have you already identified the property and the terms of the owner financing arrangement?

Gurney P

Hey there! I'm Gurney, an attorney with many years of experience. I see you're working with a drafted loan agreement for owner financing real estate.

Can you tell me which state or country the property is (or will be) located in, since real estate laws can vary by location?

Gurney P

I see, ok. Does your current loan agreement have a section for describing the collateral or security for the loan, or would you like guidance on how to add a property description section?

Gurney P

Thank you for clarifying, that really helps.

Gurney P

In Texas, a simple loan agreement is not enough to properly owner-finance real estate. You can still use the loan agreement, but you must add a property description and create a separate security instrument so the seller is legally protected if the buyer doesn’t pay. Texas requires very specific language when real property is used as collateral.

Here’s the cleanest way to handle it:

First, your loan agreement should include a new section called “Description of Property Being Sold” or “Collateral Securing the Loan.” This is where you insert the full legal description of the property — not just the street address. You can find this in the deed or county appraisal records.

Then, you must pair the loan agreement with one of the following Texas-approved security documents:

• Deed of Trust (most common)
• Or a Vendor’s Lien (traditional owner-finance method)

These documents give the seller the right to foreclose if the buyer stops paying. Without this, the loan agreement alone is not enforceable as real estate collateral.

Your Deed of Trust or Vendor’s Lien must state that the buyer is granting the property as security for repayment, list the loan amount, interest, payment terms, and include the same legal description.

Texas also has strict disclosure rules for owner financing, especially after the SAFE Act and Texas Property Code § 5.069.

Here is a draft Deed of Trust template written in simple, natural language so it’s easy for you to copy, paste, and customize. This follows Texas owner-finance rules and pairs with your loan agreement. Fill in the blanks with your names, dates, and property details.

Here is your Deed of Trust (Texas):

DEED OF TRUST

This Deed of Trust is made on __________________, 2025, by __________________________________ (“Borrower”), whose address is __________________________________________________, to __________________________________ (“Trustee”), for the benefit of __________________________________ (“Lender”), whose address is __________________________________________________.

Property Covered
Borrower grants, sells, and conveys to Trustee, in trust for Lender, the real property located in __________________ County, Texas, described as follows:

(Insert the full legal description from the deed or title records.)
Together with all buildings, improvements, fixtures, and rights belonging to the property.

Purpose of This Deed of Trust
This Deed of Trust secures Borrower’s repayment of the Loan Agreement dated __________, 20, in the principal amount of $______________, plus interest and all other obligations stated in that agreement.

Borrower’s Promises

Borrower agrees to:

• Pay the loan according to the Loan Agreement.
• Keep the property in good condition.
• Pay all taxes, insurance, and assessments when due.
• Not sell or transfer the property without Lender’s written consent.

Default

Borrower is in default if Borrower:

• Misses a payment,
• Fails to keep required insurance or taxes current, or
• Violates any term of the Loan Agreement or this Deed of Trust.

Lender’s Remedies

If Borrower defaults, Lender may instruct Trustee to sell the property at a public foreclosure sale, according to Texas Property Code requirements. Sale proceeds will be applied to the debt, fees, and costs.

Trustee’s Powers

Trustee may act upon Lender’s instructions and carry out a foreclosure sale without court action. Trustee may appoint another trustee if necessary.

Signatures

Borrower signs this Deed of Trust on the date above.

Borrower: __________________________________________
Borrower: __________________________________________

Acknowledgment (Notary block required)

Gurney P

Yes. The Deed of Trust and the Loan Agreement work together. The Loan Agreement explains the payment terms, and the Deed of Trust gives the lender the right to foreclose if the borrower doesn’t pay. They must reference each other and use the same loan amount and legal description.

Yes, you can use a Warranty Deed to transfer ownership of the property. This document will officially transfer the title from the seller to the buyer.

Once you have the Warranty Deed, Loan Agreement, and Deed of Trust ready, you'll need to record all three documents with the county clerk's office where the property is located (TX Prop § 11.004). This ensures that the transaction is legally recognized and protects both parties' interests.

Gurney P

I'm glad I could help! Do you have any other questions or is there anything else you'd like to know? Feel free to ask!

Gurney P

Anytime! Thank you too for coming in. Ok, until next time!