A first trust deed (often called a first deed of trust) is one of the most important concepts in real estate lending—especially in California, where deeds of trust are commonly used to secure loans. In plain terms, a first trust deed is a deed of trust recorded in first-lien position, meaning it’s first in line to get paid from the property’s value if the borrower defaults and the property is sold through foreclosure.
For borrowers, it’s the document that helps a lender feel secure enough to lend against a property. For lenders and investors, it’s a major risk-control tool because lien position directly affects repayment priority.
What Is a First Trust Deed?
A deed of trust is a security instrument tied to a real estate loan. When you sign it, you’re granting the lender the right to foreclose on the property if you don’t meet the loan terms.
In a deed of trust structure, there are typically three parties:
- Trustor – the borrower / property owner
- Beneficiary – the lender
- Trustee – a neutral third party who can carry out the foreclosure process if needed
A first trust deed simply means that deed of trust sits in first position—ahead of other consensual liens like seconds/HELOCs—so it generally has the strongest claim to the collateral.
How Is “First Position” Determined?
Most of the time, lien priority comes down to timing and recording.
- In California, priority is strongly tied to recording (and race-notice concepts), meaning an interest that’s properly recorded can take priority over later interests.
- Practically speaking: the first trust deed is typically the earliest recorded deed of trust on title (unless a special rule applies).
That “first in line” position matters because, in a foreclosure sale, senior liens generally get paid before junior liens.
Why First Trust Deeds Matter
A first trust deed is foundational because it affects:
- Risk – First position generally has more protection than second position.
- Pricing and terms – Lower risk often supports better loan terms compared with junior liens.
- Exit outcomes in default – First position has priority to sale proceeds; junior liens may get little or nothing if value is tight.
This is why lenders and private investors often care as much about lien position as they do about credit or income.
How Foreclosure Typically Works Under a Deed of Trust
One key reason deeds of trust are common in California is that they typically include a power of sale, which can allow a nonjudicial foreclosure (a trustee-run process, rather than a court case).
While the details vary by situation, nonjudicial foreclosures in California commonly involve documents like:
- a Notice of Default, and later
- a Notice of Trustee’s Sale (after required waiting periods)
The major takeaway: in a foreclosure scenario, being in first position is a very different risk profile than being behind another lien.
First Trust Deed vs. Second Trust Deed
A second trust deed is a deed of trust that sits behind the first. That means:
- The first trust deed is paid first from sale proceeds.
- The second trust deed only gets paid if there is money left after the first is satisfied.
In real-world terms, a second can be wiped out (or severely impaired) in a foreclosure if the property value isn’t high enough.
“First Trust Deed” Does Not Always Mean “Absolute First”
Even if a deed of trust is in first position among lenders, certain liens can still come ahead due to special priority rules.
Common examples in California include:
- Property taxes: property tax liens can have super-priority over other liens.
- Mechanics liens (in some cases): mechanics lien priority can relate back to the start of work, which can create priority issues for lenders if work began before a deed of trust was recorded.
This is one reason lenders emphasize title review, payoff demands, and construction controls—because “first” in everyday language can still have important exceptions.
Where You’ll See First Trust Deeds in Real Estate
First trust deeds show up in many common loan scenarios:
- Purchase loans (traditional or private)
- Refinances
- Fix-and-flip loans (purchase + rehab structures)
- Bridge loans (time-sensitive acquisitions, cash-out, or event-driven liquidity)
- Estate and trust situations (short-term solutions tied to a future sale or refinance)
In each case, the first trust deed is the document that ties the loan to the property as collateral.
How California Hard Money Lender Looks at a First Trust Deed
At California Hard Money Lender, first-position collateral is a core part of risk management—because lien priority and a clear path to repayment matter as much as the borrower’s plan.
When we evaluate a first trust deed loan request, we typically focus on:
- Title and lien position (confirming what’s senior, what’s junior, and what must be paid off)
- Property value and marketability (as-is and, if applicable, after improvements)
- Leverage (loan amount relative to value)
- Exit strategy (sale, refinance, or other repayment event)
- Timeline and execution risk (especially for value-add projects)
The goal is simple: keep the structure clean, protect lien priority, and make sure the deal still works even if things take longer or cost more than expected.
Common Mistakes Borrowers Make With First Trust Deeds
Even strong deals can go sideways when lien position or title issues are overlooked. Common mistakes include:
- Assuming you’re “first” without confirming title
- Forgetting property taxes, HOA issues, or existing recorded liens
- Starting work before financing/title is finalized, creating potential mechanics lien priority complications
- Overleveraging (too much debt stacked against the property)
- Vague exit plans (“I’ll refinance later” without a realistic qualifying path)
Using First Trust Deeds Wisely as a Borrower
If you’re borrowing against real estate—especially for investment—first trust deed basics help you protect your project:
- Treat title and lien position as deal-critical, not paperwork.
- Keep your scope, timeline, and exit strategy realistic.
- Build buffers for holding costs and surprises.
- Be transparent about existing liens, taxes, or construction plans (it speeds approvals and reduces last-minute issues).
IMPORTANT NOTE
This article is for general informational purposes only and should not be considered financial, tax, or legal advice. Deed of trust practices, lien priority rules, foreclosure procedures, and lending standards vary by situation and jurisdiction. Before entering into any real estate financing or investment transaction involving a first trust deed, you should consult a qualified attorney, title professional, tax advisor, and licensed real estate or lending professional regarding your specific circumstances and objectives.
