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TITLE INSURANCE GLOSSARY A B C D E F G H I J L M P Q R S T V W A Abstract (Of
Title) 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 purchases
clear, marketable and insurable title. 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 loan with an
interest rate that changes periodically in keeping with a current index, such as
one-year treasury bills. Typically, however, ARMs can jump more than two
percentage points per year or six points above the starting rate. Affidavit A sworn statement in
writing. Agreement of Sale Known by various
names, such as contract of purchase agreement, or sale 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 which
enables the borrower to reduce his or her debt gradually through monthly payments of
principal. Annual Percentage
Rate (APR) On some mortgages
the APR is higher than the actual mortgage rate. Appraisal An expert judgment
or estimate of the quality or value of real estate as of a given date. Assumption A mortgage that
allows a new owner to take over payments.
The original borrower remains liable on the mortgage note. Contractor In the construction
industry, a contractor is one who contracts to erect buildings or portions of
buildings. 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 Veteran’s Administration. It is subject to
conditions established by the lending institutions and between states. (States
have various interest limits.) 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/she 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. 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, mortgage, 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/she wants to
purchase with the encumbrance or what can be done to remove it. Equity The portion of a
property you own outright. If, for example, you put 20 percent down on a house,
you have 20 percent equity in your property. Over time, you earn more equity as
you pay off the mortgage. 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
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 sealed. Earnest money, for example, may be
held in escrow until closing day. FHLMC (Freddie
Mac) Federal Home Loan
Mortgage Corporation. An affiliate of
the Federal Home Loan Bank, which creates a secondary market in conventional residential
loans and FHA and VA loans by purchasing mortgages from members of the Federal
Reserve System and the Federal Home Loan Bank System. Fixed-Rate
Mortgage A loan that carries
an unchangeable interest rate over its entire term - typically a period of 12 to 30
years. Foreclosure Legal process by
which a mortgagor of real property is deprived of his or her interest in that
property due to failure to comply with terms and conditions of the mortgage. FNMA (Fannie-Mae) The Federal National
Mortgage Association. A federally sponsored private corporation which provides
a secondary market for housing mortgages.
I In personam Directed at specific
persons rather than against property generally for all people. In rem Pertaining to
property or people in general. Instrument A written document. Interest A charge paid for
borrowing money. (See mortgage note.) Interest only
payments A mortgage where
only the interest is paid on a monthly basis.
This means that the buyer gets no equity. This is only used on some purchase money mortgages where the
buyer is responsible for paying the seller the entire amount of the second
mortgage at some time in the future.
J Judgment A decree of a court. A title that is free
and clear of objectionable liens, clouds or other title defects. A title which
enables an owner to sell his/her property freely to others and which others will
accept without objection. Mortgage A lien or claim
against real property given by other 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
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 or piece of property. 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. A map or chart of a
lot, subdivision or community drawn by a surveyor showing boundary line,
buildings, improvements on the land and easements POC Paid outside of
closing. Sometimes the lender requests
this money before settlement. If you
pay any charges before settlement they should be written on the settlement sheet. They are written on the proper credit line
outside of your column. They should
also be marked P.O.C. Points A one-time-only fee
you pay up front to your lender, sometimes in exchange for a slightly lower
mortgage rate. One point equals one
percent of the total amount you plan to borrow. Power of Attorney An instrument
authorizing another to act on one’s behalf as his/her agent or attorney. Prepayment Payment of a mortgage
loan, or part of it, before the 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 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. PMI Private mortgage
insurance. PMM Purchase money
mortgage. A mortgage given by the
seller simultaneously with the purchase of real estate to secure the unpaid
balance of the purchase price. Pro-Rate To allocate between
seller and buyer their proportionate share of an obligation paid or due. Promissory Note A promise to
pay. The promissory note document gives
the mortgage company “in personam” jurisdiction over the mortgagor. 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).
R Real Estate
Broker 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. Real Property Land and that which
is affixed to it. Refinancing The process of the
same mortgagor paying off one loan with the proceeds from another loan. Reissue Rate A reduced rate of
title insurance premium applicable in cases where the owner of the land has
been previously insured in an owner’s policy by the insurer within a certain
time. 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 or she
desires the protection of title insurance. Title Insurance
Binder or Commitment A report issued by a
title insurance company binding or committing the title insurance company to
issue the form of policy designated in the commitment or binder upon compliance
with and satisfaction of requirements set forth in the commitment or binder. Title Search or
Examination A check of the title
records, generally at the local courthouse, to make sure the buyer is
purchasing property 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. Transfer Taxes Money paid to the
county and/or state when property is sold. 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.)
V VA The Veterans
Administration. They insure mortgages. |
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