| A
Abstract (Of Title; also called
Title Report or Commitment for Title Insurance)
A summary of the public records relating to the title
of a piece of land. An attorney or title insurance company reviews an
abstract of title to determine whether there are any defects that must
be cleared before a buyer can purchase clear, marketable, and insurable
title.
Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate may be changed at
specified times, within specified limits, based on a specific index.
Agreement (Purchase & Sale)
Known by various names, such as contract of purchase,
agreement of sale, 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.
Amortization
A payment plan that enables the borrower to reduce his
debt gradually through monthly payments of principal and interest.
Annual Percentage Rate (APR)
The finance charge calculated over one year, taking
into account all costs of the loan as required the Truth In Lending
Act.
Assumption of Mortgage
An obligation undertaken by the purchaser of property
to be personally liable for payment of an existing mortgage. In an
assumption, the purchaser is substituted for the original mortgagor in
the mortgage instrument and the original mortgagor is released from
further liability under the mortgage. Since the mortgagor is to be
released from further liability in the assumption, the mortgagee's
consent is usually required. The original mortgagor should always
obtain a written release from further liability if he desires to be
fully released under the assumption. Failure to obtain such a release
renders the original mortgagor liable if the
person assuming the mortgage fails to make the monthly payments. An
"Assumption of Mortgage" is often confused with "purchasing subject to
a mortgage." When one purchases subject to a mortgage, the purchaser
agrees to make the monthly payments on an existing mortgage, but the
original mortgagor remains personally liable if the purchaser fails to
make the monthly payments. Since the original mortgagor remains liable
in the event of default, the mortgagee's consent is not required to a
sale subject to a mortgage. Both "Assumption of Mortgage" and
"Purchasing Subject to a Mortgage" are used to finance the sale of
property. They may also be used when a mortgagor is in financial
difficulty and desires to sell the property to avoid foreclosure.
B
Binder
Known as the "Offer To Purchase." A preliminary
agreement, secured by the payment of earnest money, between a buyer and
seller as an Offer to purchase real estate. A binder secures the right
to purchase real estate upon agreed terms for a limited period of time.
If the buyer changes his mind or is unable to purchase, the earnest
money is forfeited unless the binder expressly
provides that it is to be refunded.
C
Certificate of Title
A certificate issued by a title company or a written
opinion rendered by an attorney, that the seller has good marketable
and insurable title. A certificate of title offers no protection
against any hidden defects in the title, which an examination of the
records could not reveal. The issuer of a certificate of title is
liable only for damages due to negligence. The protection offered a
home owner under a certificate of title, is not as great as in title
insurance policy.
Chattels
Items of tangible movable or immovable property,
except real estate. Usually refers to personal, movable possessions
such as furniture, appliances, accessories etc.
Closing Costs
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 the price of the
property and items prepaid at the closing day. A typical list includes,
cost of abstract, documentary stamps on deed, recording mortgage,
survey charge, escrow fees, attorney's fees (and real estate
commission). The Purchase and Sale Agreement may state who will pay
each of the above costs.
Closing Day
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
Contract or Agreement of Sale.
Cloud (On Title)
An outstanding claim or encumbrance that adversely
affects the marketability of title.
Condominium
Individual ownership of a dwelling unit and interest
in the common areas and facilities that serve the multi-unit project.
Conventional Mortgage
A mortgage loan not insured by HUD or guaranteed by
the Veteran's 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.
Conveyance
The transfer of ownership of real property from one
person to another.
D
Deed
A formal written instrument by which title to real
property is transferred from one owner to another. The deed should
contain an accurate description of the property being conveyed, should
be signed and witnessed according to the laws of the State where the
property is located, and should be delivered to the purchaser at
closing day. There are two parties to a deed: grantor and grantee.
Deed of Trust
Like a mortgage, a security instrument, where real
property is given as security for a debt. However, in a deed of trust
there are three parties to the instrument: borrower, trustee, and
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.
Default
Failure to make mortgage payments as agreed to in a
commitment based on the terms and at the designated time set forth in
the mortgage or deed of trust. It is the mortgagor's responsibility to
remember the due date and send the payment prior to the due date, not
after. Generally, thirty days after the due date if payment is not
received, the mortgage is in default. In the event of default, the
mortgagee may give the lender the right to accelerate payments, take
possession and receive rents and start foreclosure.
Depreciation
Decline in value of a house due to wear and tear,
adverse changes in the neighborhood, or any other reason.
Documentary Stamps
A State tax in the forms of stamps, required on deeds
and mortgages when real estate title passes from one owner to another.
The amount of stamps required varies by State.
Down Payment
The amount of money paid by the purchaser to the
seller upon the signing of the Agreement of Sale. The Agreement of Sale
will refer to the down payment and will acknowledge receipt of the down
Payment. down payment is the difference between the saleprice and the
maximum mortgage amount. The down payment may not be refundable if the
purchaser fails to buy the property without good cause. If the
purchaser wants the down payment to be refundable, he should insert a
clause in the Agreement of Sale
specifying the conditions under which the deposit will be refunded. If
the seller cannot deliver good title, the Agreement of Sale usually
requires the seller to return the down payment and to pay interest and
expenses incurred by the buyer.
E
Earnest Money
The deposit money given to the seller or by the 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, 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 owners land. An electric company
obtaining a right of-way across private property is a common example.
Encroachment
An obstruction, building or part of a building that
intrudes beyond a legal boundary onto neighboring private or public
land or a building extending beyond the building line.
|
Encumbrance
A legal right or interest in land that affects a good
or clear title, and diminishes the land's value. It can take many
forms, such as zoning ordinances, easement rights, claims, mortgages,
liens, charges, a pending legal action, unpaid taxes, or restrictive
covenants. An encumbrance does not legally prevent transfer of the
property to another. A title search is all that is usually done to
reveal the existence of encumbrances, and it is up to the buyer to
determine whether he wants to purchase with the encumbrance, or what
can be done to remove it.
Equity
The value of a homeowners unencumbered interest in
real estate. Equity is computed by subtracting from the property's fair
market value the total of the unpaid mortgage balance and any
outstanding liens or other debts against the property. A homeowner's
equity increases as he pays off his mortgage or as the property
increases in value. When the mortgage and all other debts against the
property are paid in full, the homeowner has 100% equity in his
property.
Simply Put: The difference between
the market value of a home and the balance of the mortgage outstanding
on it.
Escrow
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 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.
F
Fixtures
A chattel so annexed to realty, that it may be
regarded as legally part of it. For example, chandeliers, blinds,
shelves.
Foreclosure
A legal term applied to any of the various methods of
enforcing payment of the debt secured by a mortgage, or deed of trust,
by taking and selling the mortgaged property and depriving the
mortgagor of possession.
G
General Warranty Deed
A deed that conveys, all the grantor's interests in
and title to the property to the grantee, and also warrants that if the
title is has a .cloud" on it, the grantee may hold the grantor liable.
Grantee/Grantor
That party in the deed who is the buyer/seller.
I
Inspection
Buyers will generally want to have a professional
inspection made of the property before they are fully obligated to
complete the purchase. Inspections include structural, roofing,
mechanical (plumbing and electrical) inspections, but may also include
looking into environmental risks in teh area, radon testing, lead paint
inspection and other tests, such as water and sewer if there are
on-site water and sewer systems, rather than municipal service.
L
Lien
A claim by one person on the property of another as
security for money owed. Such claims include obligations not met,
judgments, unpaid taxes, materials or labor.
M
Marketable Title
A title that is free and clear of objectionable liens.
clouds. or other title defects. A title that enables an owner to sell
his property freely to others and which others will accept without
objection.
Mortgage
Along with the mortgage note, the borrower signs an
agreement, granting the lender a security interest in the home being
purchased with the loan proceeds. The borrower is agreeing to allow the
home to serve as collateral for the loan. In the event of default the
mortgage agreement allows the lender to take possession of the
collateral and sell it to obtain an immediate repayment of the loan and
all arrears. If the sale of the home does not produce an amount
sufficient to cover what is owed, the personal nature of the promise to
repay the loan will require the borrower to make up the difference. Any
amount in excess of what is owed (i.e., the borrowers ) will be
returned to the borrower. Mortgages generally run from 10 to 30 years,
during which time the loan is to be paid off, usually monthly.
Mortgage Commitment
A written notice from a bank or other lending
institution saying it will advance mortgage funds in a specified amount
to enable a buyer to purchase a house.
Mortgage Insurance Premium
The payment made by a borrower monthly to the lender,
for transmittal to HUD, to help defray the cost of the FHA mortgage
insurance program and provide a reserve fund to protect lenders against
loss in insured mortgage transactions. In FHA insured mortgages this is
1/2% annually.
Mortgage Note
A written agreement to repay a loan, or a promissory
note. The agreement, secured by a mortgage, serves as proof of
indebtedness and states the manner in which it shall be paid. The note
states the actual amount of the debt and renders the mortgagor
personally responsible for repayment.
Mortgage (Open-End)
A mortgage with a provision that permits borrowing
additional money in the future without refinancing the loan or paying
additional financing charges. Open-end provisions often limit such
borrowing to no more than would raise the balance to the original loan
figure.
Mortgagee/Mortgagor
The lender/borrower in a mortgage agreement.
P
PITI
Principal, Interest, Taxes and Insurance.
Plat
A map or chart of a lot, subdivision or community
drawn by a surveyor, showing boundary lines, buildings, improvements on
the land, and easements.
PMI
Private Mortgage Insurance written by a private
insurance company that protects the lender in the event the borrower
defaults on the loan. Premiums are paid by the borrower. This is a
reuqirement on loans that exceed 90% of the value of the property. The
PMI constitutes an additional amount paid with each monthly or other
periodic installment of the principal and interest due on the mortgage.
PMI is required by certain lending regulations until the balance due on
the loan is equal to or less than 80% of the value. At that time, the
borrower should make a written request of the lender that the PMI
payments be discontinued.
Points
Sometimes called "discount points." A point is 1% of
the amount of the mortgage loan. Points are charged by a lender to
raise the yield on his loan, at a time when money is tight, interest
rates are high, and there is a legal limit to the interest rate that
can be charged on a mortgage. Buyers are prohibited from paying points
on HUD or Veteran's Administration guaranteed loans. Sellers can pay
however. On conventional mortgages, points may be paid by the buyer or
seller or split between them.
Prepayment
Payment of a mortgage loan or part of it, before due
date. Mortgage agreements often restrict the right of prepayment either
by limiting the amount that can be prepaid in any one year or charging
a penalty for prepayment. The FHA does not permit such restrictions.
Principal
The basic element of the loan, as distinguished from
interest and mortgage insurance premium. In other words, principal is
the amount upon which interest is paid.
Q
Quitclaim Deed
A deed that transfers whatever interest the maker of
the deed may have in the particular parcel of land. It is often given
to clear title when the grantors 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.
R
Restrictive Covenants
Private restrictions limiting the use of real
property. They are created by deed and may "run with the land," or may
be
"personal" and binding only between the original seller and buyer. The
determination whether a covenant runs with the land or is personal is
governed by the language of the covenant, the intent of the parties,
and the State. Covenants that run with the land are encumbrances and
may affect the value and marketability of title. Restrictive covenants
may limit the density of buildings per acre, regulate size, style or
price range of buildings to be erected, or prevent particular
businesses from operating.
S
Second Mortgage
An additional mortgage that is subordinate to the
first mortgage. In the event of a default, the second mortgagee
receives payment only after the first mortgagee is paid.
Special Lien
A lien that binds a specified piece of property,
unlike a general lien which is levied against all one's assets. It
creates a right to retain something of value belonging to another
person, as compensation for labor, material, or money expended in that
person's behalf. In some localities it is called "particular" lien or
"specific" lien.
Special Warranty Deed
A deed in which the grantor conveys title to the
grantee and agrees to protect the grantee against title defects. In a
special
warranty deed, the grantor guarantees to the grantee that he has done
nothing during the time he held title to the property which has or
which might in the future, impair the grantee's title.
Survey
A map or plat made by a licensed surveyor showing the
land with its elevations, improvements, boundaries, and its
relationship to surrounding tracts of land.
T
Title
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 defects in title. Title insurance may be
issued to either the mortgagor as an "owner's title policy" or to the
mortgagee as a "mortgagee's title policy." Insurance benefits will be
paid only to the "named insured."
Title Search
A check of the title records, generally at the local
courthouse, to make 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.
Trustee
A party given legal responsibility to hold property in
the best interest of another. The trustee is placed in a position of
responsibility for another, a responsibility enforceable in a court of
law.
|