Terms to Know
Here are a few terms that you might want to familiarize yourself with between the current time and the time leading up to closing:
A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.
Adjustable Rate Mortgage (ARM) -
A loan with an interest rate that changes periodically in keeping with a current index, like one-year treasury bills. Typically, however, ARM’s can’t jump more than two percentage points per year or six points above the starting rate.
Agreement of Sale -
Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.
An expert judgment or estimate of the quality or value of real estate of a given date.
Broker (Real Estate) -
A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner. (for example, the buyer receives financing or sells her old home first).
- The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.
Closing Fees -
The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day. This is a typical list, however please note that all fees are negotiable between buyer and seller.
Commitment for Title Insurance (sometimes just called a commitment) -
Issued by a title insurance company and contains the conditions under which a title insurance policy will be issued. Conditional Offer-An offer to buy a property, but only under certain circumstances (for example, the buyer receives financing or sells her old home first).
Conventional Mortgage -
A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)
Deed of Trust -
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.
Earnest Money -
The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.
Easement Rights -
A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.
Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.
Escrow money -
Escrow money is held by a third party until the deal is wrapped up. Earnest money, for example, may be held in escrow until closing day.
Fixed-Rate Mortgage -
A loan that carries an unchangeable interest rate over its entire term-typically a period of 15-30 years.
General Warranty Deed -
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.
That party in the deed who is the buyer or recipient.
That party in the deed who is the seller or giver.
U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.
legal claim on somebody's property: the legal right to keep or sell somebody else's property as security for a debt.
Market Value -
The price that a home will likely fetch on the market, based on comparisons to similar homes that have sold recently.
A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government-insured or loan-guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.
The lender in a mortgage agreement.
The borrower in a mortgage agreement
A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements. actually sited on the land according to its legal description.
Quitclaim Deed -
A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has.
The process of the same mortgagor paying off one loan with the proceeds from another loan.
A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.
As applied to real estate, an enforced charge imposed on persons, property, or income, to be used to support the State. The governing body in turn utilizes the funds to the best interest of the general public.
As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.
Title Insurance -
Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.
Title Search or Examination -
A check of the title records that makes sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive covenants filed in the record, which would adversely affect the marketability or value of title.
A party who is given legal responsibility to hold property in the best inters of or “for the benefit of” another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law.