Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.
Adjustable-Rate Mortgage (ARM)
A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
Adjustment Period
This is the length of time for which the interest rate is fixed on an adjustable rate mortgage. After that period it will be adjusted – typically once a year depending on the index.
Alienation Clause
Provision in a mortgage document stating that the loan must be paid in full if ownership is transferred.
Amortization
A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.
Annual Percentage Rate (APR)
A measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans.
Appraisal
An expert judgment or estimate of the quality or value of real estate as of a given date.
Assessed Value
A figure in dollars determined for tax purposes by an assessor which reflects a property’s worth and which, unless exempt, is used to compute a tax dollar obligation by multiplying it by a tax rate.
Assumability
When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and may charge a fee for the assumption. Some mortgages contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may make you pay the entire balance that is due when you sell the home. Assumability can help you attract buyers if you sell your home.
Attached Home
A home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.
Balloon Mortgage
A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire amount of the outstanding principal. Usually they have terms of 3, 5, and 7 years.
Bridge Loan
An interim loan is made to finance a buyers new residence if the buyer is unable to sell his/her current residence but needs money to close the transaction.
Buydown
With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payments, usually for the first 1, 2 or 3 years of the loan. The seller may increase the sales price to cover the cost of the buydown, or may offer a buydown instead of lowering the price..
Caps
A limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. Most ARMs have an interest rate caps to protect you from enormous increases in monthly payments.
A lifetime cap limits the interest rate increase over the life of the loan. Lifetime caps can vary by lender, but most ARMs have caps of 5% or 6%. A periodic or adjustment cap limits how much your interest rate can rise at one time. Generally, a 6 month ARM will have a cap of 1% while a 1 year ARM will have a 2% cap.
Capital Gains
Profit earned from the sale of real estate. The new tax code does not tax the profits from the sale of a home if the proceeds are used to buy another house costing at least as much as the sales price of the old one.
Certificate of Eligibility
The document issued by the U.S. Department of Veterans Affairs. It is required when applying for VA loans.
Certificate of Occupancy
Document issued by a local governmental agency that states a property meets the local building standards for occupancy.
Certificate of Reasonable Value
An appraisal issued by the VA approved appraiser which establishes the property’s current market value.
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 to the property which he is offering for sale. 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 homeowner under a certificate of title is not as great as that offered in a title insurance policy.
Clear Title
A title that free of clouds and disputed interests.
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 price of the property and are items prepaid at the closing day. This is a typical list:
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 agreement of sale.
Commission
Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price–5 to 7 percent on houses, 10 percent on land.
Commitment
A written agreement between a lender and a borrower to loan money on specific terms or conditions.
Condominium
Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.
Construction loan
A short term loan to pay for the construction of buildings or homes. These loans usually provide periodic disbursements to the builder as each stage of the building is completed. Generally followed by long term financing called a “take out” loan issued upon completion of construction.
Contingency
A condition put on an offer to buy a home; such as the perspective buyer making an offer contingent on his or her sale of a present home.
Contractor
In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.
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.
Conversion Option
Some ARMs come with options to convert them to a fixed rate mortgage during a given time period without having to go through a refinancing, which could cost up to 5 percent or 6 percent of the loan amount.
Credit Report
A report documenting the history of how you paid back the companies you have borrowed money from, or how you have met other financial obligations. For your mortgage, the credit report must be ordered by and issued to the mortgage broker.
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: the grantor and the grantee. (See also Deed of Trust, General Warranty Deed, Quitclaim Deed, and Special Warranty Deed)
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.
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 mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.
Deferred interest
When the monthly payments do not cover all of the interest cost, the unpaid interest is deferred by adding it to the loan balance. A typical feature of pay option ARMs. In my opinon, these loans have their place, but they are not the right choice for most borrowers.
Deficiency Judgment
Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the mortgages.
Depreciation
Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.
Discount Points
You may choose to pay discount points in order to obtain a lower rate. In my opinon, in most situations this is generally not in your best interest. If you think you are interested in paying discount points, I can help you do the math and determine how long it would take you to benefit.
Downpayment
The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the downpayment amount and will acknowledge receipt of the downpayment. Downpayment is the difference between the sales price and maximum mortgage amount. The downpayment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the downpayment 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 agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the downpayment and to pay interest and expenses incurred by the purchaser.
Due-on-Sale Clause
A clause in the Deed of Trust or Mortgage that states that the entire loan is due upon the sale of the property.
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 downpayment. 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.
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 numerous 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 such 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.
Equal Credit Opportunity Act
Prohibits discrimination in any aspect of a credit transaction on the basis of race, religion, age, color, national origin, receipt of public assistance funds, sex, or marital status.
Equity
The value of a homeowner’s 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 appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.
Escrow
The portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due.
Fair Housing Act
Prohibits discrimination in housing sales or loans on the basis of race, religion, color, national origin, sex, familial status, or handicap.
Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
A stockholder-owned corporation chartered by Congress to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases single-family and multifamily residential mortgages from lenders and packages them into securities that are sold to investors.
Federal Housing Administration (FHA)
A part of the U.S. Department of Housing and Urban Development (HUD). FHA assists first-time home buyers and others who might not be able to meet down payment requirements for conventional loans by providing mortgage insurance to private lenders. It also insures loans for home improvements and buying manufactured (mobile) homes. These programs operate through FHA approved lending institutions which submit applications to have the property appraised and have the buyer’s credit approved.
Federal National Mortgage Association (FNMA, Fannie Mae)
A stockholder-owned federally chartered corporation. Fannie Mae purchases residential home loans from mortgage lending institutions, packages the mortgages into securities and sells the securities to investors. The largest source of residential mortgage funds in the United States.
FHA Loan
A loan insured by the Federal Housing Administration open to all qualified home purchasers. Interest rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans. FHA loans cannot exceed the statutory limit.
First Mortgage
A mortgage that has priority as a lien over all other mortgages.
Flood Insurance
Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
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.
FSBO
For sale by owner.
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.
Government National Mortgage Association (GNMA, Ginnie Mae)
A wholly-owned government corporation within the U.S. Dept. of Housing and Urban Development helping to finance government-assisted housing programs. Ginnie Mae guarantees securities backed by pools of mortgages. The mortgages are insured by the Federal Housing Administration (FHA), or guaranteed by the Veterans Administration (VA) or by the Rural Housing Service (RHS). Ginnie Mae securities are bought and sold through financial institutions that trade government securities.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Hazard Insurance
Protects against damages caused to property by fire, windstorms, and other common hazards.
HUD
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.
HUD-1 Settlement Statement
A standard form that shows all charges imposed on borrowers and sellers in connection with the settlement. RESPA allows the borrower to request to see the HUD-1 Settlement Statement one day before the actual settlement.
Index
A published measure of economic conditions usually relative to other financial instruments such as Treasury notes or Treasury bills. The lender uses a particular index to calculate the interest rate on an adjustable rate mortgage (ARM) by adding a fixed margin to the index. The most common indexes are:
Constant Maturity Treasury (CMT)
Treasury Bill (T-Bill)
12-Month Treasury Average (MTA)
11th District Cost of Funds Index (COFI)
London Inter Bank Offering Rates (LIBOR)
Certificates of Deposit (CD) Indexes
Prime Rate
Interest
The cost paid for borrowing money.
Joint Tenancy
Joint tenancy is one of the methods available for two or more people to hold title to real estate or personal property. It includes a right of survivorship, meaning that on the death of one joint tenant, his/her interests transfer to the remaining joint tenants.
Jumbo Loan
A loan that is larger than the conforming loan limit established by Fannie Mae or Freddie Mac. It almost always has interest rates a little higher than conforming loan.
Lien
A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. See also Special Lien
Loan-to-Value Ratio (LTV)
The relationship between the amount of the mortgage loan and the value of the real property expressed as a percentage. For purchase loans the value of the property is the appraised value or the purchase price, whichever is less. For refinance loans the value is the appraised value.
A LTV of 90% means that you can borrow a maximum of 90% of the property value. If a LTV exceeds 80%, a Private Mortgage Insurance (PMI) — that insures the lender in the event a borrower defaults — is generally required.
Downpayment is the difference between the purchase price and the mortgage amount.
Lock
A lender’s promise to hold a certain interest rate and points for you, for a given number of days, while your loan application is processed.
Lock-ins of 30-60 days are common. If your lock-in period expires before you go to closing, you might lose the interest rate you had locked-in. You may ask lender for a longer lock-in period. But bear in mind that lenders may charge you a fee for a longer lock-in period. Request information from the lender regarding lock procedures.
Marketable Title
A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.
Margin
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
Mortgage
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.
Mortgage Broker
A person (not an employee of a lender) who brings a borrower and a lender together to obtain a federally-related mortgage loan. A mortgage broker has access to a variety of lenders and often offers the most choice in loan programs. Mortgage brokers are paid a fee by the borrower or the lender when a loan closes.
Mortgage Commitment
A written notice from the 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 to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one-half of one percent paid by the mortgagor on a monthly basis.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures 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
The lender in a mortgage agreement.
Mortgagor
The borrower in a mortgage agreement.
Multiple Listing Service (MLS)
A service offered to participating real estate brokers that lists available homes for sale. The listings are published and distributed among the member brokers to assist in sales efforts.
Negative Amortization
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn’t covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM (an option ARM, for example) has a payment cap that results in monthly payments not high enough to cover the interest due.
Non-conforming loan
Loans that do not comply with Fannie Mae or Freddie Mac guidelines. These guidelines establish the maximum loan amount, down payment, borrower credit and income requirements, and suitable properties. Loans that does conform to these guidelines may be sold to Fannie Mae or Freddie Mac.
Owner Financing
A property purchase transaction in which the property seller provides all or part of the financing.
Parcel
A separately assessed for tax purposes lot or piece of real property.
PITI
Principal, Interest, Taxes and Insurance. These components are usually included in the monthly mortgage payment.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the individual PUD unit owners.
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.
Points
Sometimes called “discount points.” A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. 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 Veterans’ Administration guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them.
Power of Attorney
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
Prepayment
Payment of 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. Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.
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.
Private Mortgage Insurance (PMI)
An insurance policy the borrower buys to protect the lender from non-payment of the loan.
Prorations
The allocation of expenses, such as taxes between buyer and seller at closing based on the number of days the property is owned during the month of closing.
Purchase Contract
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.
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. See Deed
Qualifying Ratios
Lenders use certain guidelines to determine a potential borrower’s credit-worthiness and ability to repay the loan. The two guidelines used are the housing and debt ratios. They are expressed as two numbers like 28/36 where 28 would be the housing ratio and 36 would be the debt ratio.
28/36 ratio guidelines would mean that:
1. Your housing expenses should not exceed 28 percent of your gross monthly income and
2. Housing expenses plus long- term debt should not exceed 36 percent of your gross monthly income.
The housing expenses include monthly mortgage principal, interest payments, property taxes, homeowner’s insurance and homeowners fees. Long-term debt is defined as monthly expenses extending more than 10 months into the future. The qualifying ratios vary from lender to lender, depending on the loan program.
Please note that qualifying ratios are only a rough guidelines and underwriters consider many variables in their analysis. Many times, borrowers fall outside the guidelines, but have strong compensating factors that reflect low credit risk. Strong compensating factors such as history of savings, long-term job stability, a substantial down payment or excellent credit history will influence the decision to approve or deny a particular loan.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection statute designed to help consumers be better shoppers in the home buying process. It requires that borrowers receive disclosures at various times. RESPA also prohibits certain practices that increase the cost of settlement services. More about RESPA
Recorder
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”
Refinancing
The process of the same mortgagor paying off one loan with the proceeds from another loan.
Rescission
When you refinance your primary residence, you generally have the right to cancel the loan transaction within three business days of closing. Your closing attorney will review this with you in your closing.
Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of 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 law in the State where the land is situated. Restrictive 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 or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)
Reverse Mortgage
A special type of home loan that lets elderly homeowners convert the equity in their home into cash.
Right of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
Second Home (or Vacation Home)
A vacation home that is not rented and is occupied occasionally by the owners.
Second mortgage
A mortgage in addition to the first mortgage. Home equity loans, credit lines, home improvement loans are second mortgage loans. Second mortgage is subordinate to the first one. Second mortgage loans are non-conforming loans, so, they usually carry a higher interest rate, and they often are for a shorter time period.
Secondary (subordinate) financing
Borrowing additional money toward the down payment. If it is acceptable, usually subject to a maximum combined LTV. Secondary financing is used as an alternative to obtaining Private Mortgage Insurance
Section 1031
Under section 1031 of the IRS, owners or real estate held for investment or for use in a trade or business can exchange their property tax-free for “like-kind” real estate.
Servicing
Servicing means the collection of payments, handling your escrow accounts and management of operational procedures, related to mortgages, that a lender performs.
Special Assessments
A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.
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 or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. 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 results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. Survey’s are no longer required by the lender in most loan transactions, but you may choose to have one anyway. The cost ranges from aproximately $400 to $700.
Tax Assessed Value
The assessed value of a parcel against which the tax rate is applied to compute the tax due. In case of a partial exemption, the exempt amount is subtracted from the assessed value in order to determine the taxable assessed value.
Teaser Rate
A low initial interest rate on a mortgage. A feature of option ARM loans.
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 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 Insurance Binder
Written commitment of a title insurance company to insure title to the property under the conditions stated in the binder.
Title Search or Examination
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 who is given legal responsibility to hold property in the best interest 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. See Deed of Trust
Truth-In-Lending Act ( TIL, also called Regulation Z)
Under this act a lender is required to provide you with a disclosure estimating the costs of the loan you have applied for, including your total finance charge and the Annual Percentage Rate (APR) within three business days of your application for a loan.
Underwriting
A process of deciding whether to make a loan based on your credit reputation, income, debt, appraised value of the house and other factors.
VA Loan
A mortgage for veterans and service persons guaranteed by the Department of Veterans Affairs (VA), requiring very low or no downpayments and with generous requirements for qualification.
Zoning
A local government authority’s specifications for the use of property in certain areas.
Zoning Ordinances
The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.