When purchasing or selling a home you will hear words that you may or may not be comfortable with. Below is a list of some common real estate terms:
Amortization – this is a payment plan that enables the borrower to reduce the amount of their mortgage gradually through monthly payments of principal
Appraisal – an appraiser’s opinion of the quality and value of the home
Closing Costs – both buyers and sellers will have their own closing costs associated with the sale. Some of these include lender fees, title fees, appraisal, setting up escrows
Closing Day – this is the day when the buyer and seller exchange the funds for the keys. The buyer signs the mortgage, closing costs are paid, seller provides the keys.
Cloud On Title – an issue that arises regarding a possible claim or encumbrance on the home’s title.
Commission – money paid to a real estate brokerage by the seller as compensation for listing the home or representing the buyer .
Conventional Mortgage – a mortgage loan that is not insured by HUD or guaranteed by the Veterans’ Administration or USDA.
Deed – a formal written document by which the title company will use to record the sale and the property is transferred from one owner to another. There are two parties to a deed: the grantor (seller) and the grantee (buyer).
Downpayment – the amount of money the buyer has agreed to use when obtaining the mortgage. Downpayment is the difference between the sales price and mortgage amount.
Earnest Money – the deposit money given at the time of offer acceptance. This money is applied towards to the amount of the needed downpayment. If the sale does not go through, the earnest money will either be retained by the seller or refunded to the buyer depending on the terms of the purchase agreement.
Encroachment – a building, obstruction or part of a building that intrudes onto the neighboring private or public land. This could also include fences, sheds or other structures.
Equity – the amount of value a homeowner has left after deducting all encumbrances. Equity is computed by subtracting from the home’s fair market value (sales price) the total of the unpaid mortgage balance and all other outstanding liens against the property.
Escrow – an escrow account generally refers to the monies collected by the mortgage lender as part of the monthly payment and used to cover yearly expenses for taxes, hazard insurance premiums and assessments.
Hazard Insurance – otherwise called Home Owners Insurance. This insures the home against damages caused by fire, weather and other common hazards.
HUD – U.S. Department of Housing and Urban Development. HUD insures home mortgage loans made by lenders and sets minimum standards for the borrower and the home.
Interest – a charge paid for borrowing money.
Lien – a claim by a person or entity on the property of another as security for the money owed. These can include claims such as judgments, unpaid taxes, materials, or labor.
Marketable Title – a title that is free and clear of all clouds, objectionable liens and other title defects. A title that allows an owner to sell their property to others without objection.
Mortgage – a lien against real property given by the buyer to the lender generally at the time of closing. The payments generally include principle, interest, escrow amounts. Mortgages generally are 30 years in term.
Mortgage Commitment – a written notice from the buyer’s lender saying all conditions have been cleared and the lending institution will advance the buyer’s funds at closing.
Mortgagee – the lender in a mortgage agreement.
Mortgagor – the borrower in a mortgage agreement.
Plat Drawing – a simple map of the lot showing boundary lines, buildings and other improvements if applicable. This does not replace a survey.
Principle – the amount of the mortgage that the interest is paid on.
Purchase Agreement – the contract which binds the seller to sell and the buyer to buy under specific terms and conditions. This contract must be signed by both parties to be executed.
Special Assessments – a “special” tax imposed on a property for the improvement of the community and/or property itself. Examples include road construction, sidewalks, sewers, street lights, schools.
Survey – a plat of the property made by a licensed surveyor showing the boundaries and improvements of the parcel.
Title – for this purpose the rights of ownership and possession of a particular property/home. The ownership interest one has in a piece of real estate.
Title Insurance – insurance that protects the lender and/or homeowner against loss of their interest in a property due to legal defects in the title. Lenders will require a lender’s title insurance policy. Buyer’s will have the option of purchasing an “owner’s title policy”, if they desire the same protection.
Title Search – the work the title company does to check the title records to make sure the buyer is purchasing a house from the legal owner. The title company also investigates for any liens and overdue special assessments or other claims that would adversely affect the marketability of value of title.