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Abstract of Title: A condensed history or summary of all transactions affecting a particular tract of land. Addenda (Addendum, singular): These are supplemental documents that are part of a purchase agreement. Adjustable Rate Mortgage, ARM: A loan where the interest rate adjusts to current rates during the duration of the loan. Annual Percentage Rate, APR: The cost of the loan, including the interest rate, points, origination fee and other charges. Arbitration Agreement: When a seller and buyer agree to settle all disputes about the property out of court. If both parties sign, they agree to have an independent arbitrator decide disputes. Assessments: When a city makes improvements to city property, homeowners must pay for these improvements through their city taxes. Association Dues: Payments condominiums and townhouse owners make for upkeep and management of shared property; typically paid monthly directly to the homeowners association and not included in your monthly loan payment. Assumable: A loan that a buyer can arrange to take over from the seller. Bill of Sale: Receipt of Personal Property received in a real estate transaction. Buyer's Broker: An agent who works on behalf of the buyer. Clear Title: One which is not encumbered or burdened with defects. Closing Costs: These are costs involved in transferring ownership of a home that the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc. Commitment Letter: A letter from your lender showing qualification of a loan and listings the terms. Condominium: A system of individual fee ownership of units in a multi-unit structure, combined with joint ownership of common areas of the structure and land. Contingency: A clause that is added to a purchase agreement stating that certain terms be met within a specified time frame for the purchase agreement to remain valid. Contract for Deed: An owner offering the buyer financing, and the buyer makes monthly installments to the owner. Conventional Loan: Loans without government involvement or backing. Cooperative: A residential multi-unit building owned by and operated for the benefit of persons living within. Credit Score: The rating a credit reporting agency gives you based on your credit history. Deed: A written document by which the ownership of land is transferred from one person to another. Default: Failure to make loan payments when they are due. Down Payment: An up-front payment made on a home. Earnest Money: “Good faith” money usually paid to the agent when you make an offer on a home. If the offer is approved, the money is counted toward payment on the property. If the offer is denied, the money is returned to the buyer. Easement: An interest in land owned by another that entitles its holder to a specific limited use, such as laying a sewer, putting up electric power lines, or crossing the property in the case of a shared driveway. Equity: The portion of the home's value that you own, free and clear of any mortgage or lien. Encroachment: A fixture, such as a house, wall or fence, which intrudes upon another's property. Escrow: Money paid in addition to the monthly mortgage payment this is used toward paying property taxes and insurance. FHA Loans: Home loans made through a private lender that are insured against loss by the Federal Housing Administration. FHA loans have loan down payments (currently 3.5%) and allow you to borrow a larger amount than you would be allowed to borrow in a conventional loan. For Sale By Owner (“FSBO”): FSBO, pronounced “fisbo” is a home that is offered for sale by the owner without the benefit of a real estate professional. Fixed Rate Loan: A loan with a constant interest rate over the term of the loan. Good Faith Estimate: The disclosure form on which your lender estimates all closing costs. A lender must give you this form within three days after you apply for a loan. Gross Income: Your income before you pay taxes. HUD-1 Form: A settlement statement listing of all the closing costs. The U.S. Department of Housing and Urban Development (HUD) requires that a closer make this statement available to a buyer one business day before the closing. Homeowner's Insurance: Also called hazard insurance. Insurance which home buyers must purchase to protect the investment they and their lender have in the home. Homestead Tax Credit: Tax credit given for property that is owner-occupied. Interest: Lender's charge for a loan. Joint Tenancy: Where two or more persons hold real estate jointly for life, the survivors to take the interest of the one who dies. Judgment: A decree of a court. “In practice this is a lien or charge upon the lands of the debtor resulting from the Court's award of money to a creditor.” (See Judgment Lien) Judgment Lien: The charge upon the lands of a debtor resulting from the decree of a court properly entered in the judgment docket. Lender's Title Insurance Policy: A form of title insurance policy that you pay to protect the lender from claims on the property title. This form does not provide protection for the owner. Lien: A hold, a claim or charge allowed a creditor upon the lands of a debtor. “Some examples are mortgage liens, judgment liens, mechanic's liens.” Loan Origination Fees: Fees you pay your lender for handling and processing your loan application. Loan Processing: A lender's analysis of your ability to qualify for a loan. The analysis involves weighing your income, credit report and financial records against the value of the home you want to buy. Lock-In Agreement: An agreement you make with your lender to guarantee you the interest rate your lender quotes for your loan. You can lock in a rate when you apply for a loan or at any time before the closing. Long-Term Debt: Any debt you will continue to owe on for six months or more. Marketable Title: A good title about which there is no fair or reasonable doubt. Mechanic's Lien: A lien allowed by statue to contractors, laborers and material-men on buildings, or other structures upon which work has been performed or materials supplied. Mortgage: An instrument used to encumber land as security for a debt. Mortgagee: A designation for the mortgage lender on lands. Mortgagor: A designation for the mortgage borrower on lands. Mortgage Discount Points: Prepaid interest on a loan. One point equals 1 percent of your total loan. Mortgage Insurance Premium, MIP: Insurance that a lender is required to pay on for an FHA loan. Multiple Listing Service, MLS: A service that real estate agents subscribe to that lists home for sale and homes that have sold by neighborhood, price and features. Owner's Title Insurance Policy: A policy of title insurance which insures a named owner against loss by reason of defects, liens and encumbrances or lack of marketability of the title. The company issuing the policy also agrees to defend covered claims made against the title. (This is optional coverage; but highly encouraged.) PITI: The monthly loan payment which includes “Principal, Interest, Taxes and Insurance.” Prepayment Penalty: A penalty fee assigned for early payoff on a loan. Prime Mortgage: The highest grade of mortgage that you qualify for, also called Grade “A.” Principal: The total amount you are borrowing to pay for a home. This is usually the purchase price minus the down payment. Private Mortgage Insurance, PMI: If you make less than a 20% down payment on a conventional loan, you will be required to pay for this insurance. Property Tax Adjustment: Reimbursement to the seller for taxes already paid for the year. Purchase Agreement: A legally binding agreement between the buyer and seller that lists the terms and conditions of the sale of the property, including all addendums and contingencies. Real Property: Land and that which is affixed to it. Registered Land: See Torrens Title. Re-Issue Credit: Savings on the cost of title insurance for using the same title company that the previous owner used. Because the company is “re-issuing” the insurance, it can offer a lower rate. Sub-Prime Mortgage: A grade “B” or lower loan that has a higher interest rate than a prime mortgage; usually because the borrower is a higher risk. Subagent: A seller's agent who may bring a potential buyer to a home, but owes their duties/loyalty to the seller. Tenancy in Common: An estate or interest in land held by two or more people each having equal rights of possession and enjoyment but without any right of survivorship between the owners. Title: The evidence or right which a person has to the ownership and possession of land. Title Defect: Any legal right held by others to claim property or to make demands upon the owner. Title Insurance: Insurance against loss or damage resulting from defects or failure of title to a particular parcel of real property. (See Lender's Policy and Owner's Policy) Title Search: An examination of public records, laws and court decisions to disclose the current facts regarding ownership of real estate. Truth-In Housing Inspection Report: An inspection that the seller pays for that discloses the condition of the house. Truth-In Lending Disclosure Statement: A statement from your lender stating all fees and costs of a loan using the annual percentage rate (APR). Underwriting: Risk analysis conducted by a lender to decide whether or not to approve you for a loan. VA Loan: Low-interest, no down payment loans available to those who have served in the U.S. Military. VA loans are guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private lender. Click here for the entire 6-page printable PDF file for "Buying A Home" |
