One of the problems home buyers encounter is the lack of adequate liquid finances to fully pay off the purchase price of a home. What buyers usually do is they secure a loan from a lending institution or a bank and the payment terms are formalized by the use of a Promissory Note.
A promissory note, in essence, is a document which indicates who the parties to the contract are, the full amount that is being borrowed, the interest that will be incurred, penalties for late payments, and the payment terms (how much, how often) agreed upon by the lender and the borrower. This is a legally binding document and should be honored by both parties, and if there are any changes in the previously agreed upon terms and conditions, these should be formalized in writing.
What is important in a promissory note is the terms of payment. There are four common payment methods, and the buyer can select the terms which he feels most comfortable with. A borrower may pay: in equal monthly installments; equal monthly installments and a final balloon payment; the interest first and the final payment later; or simply one full payment of principal and interest.