This is the amount of mortgage based on the final purchase price of the home minus the down payment.
Money that the buyer provides to their lender as their portion of the purchase price. This is considered the buyers’s equity or cash investment in their home. This money typically equals 10 – 25% of the purchase price, depending on the type of loan.
Money paid for the lender’s appraisal of the property.
Credit Report Fee
A fee charged by the lender to obtain a credit report for the buyer.
Due at closing, this is the amount of interest due on the loan during the time period between escrow closing and the first mortgage payment.
An acronym for principal, Interest, Taxes and Insurance = the estimated monthly house payment.
Principal and Interest
Principal is the amount to be applied towards the balance of the loan, and interest is amount charged to finance the loan.
The process of reducing debt through a schedule of fixed payments at regular intervals of time. The amount of the payment that applies to interest and the amount that applies to principal changes over time.
Annual Percentage Rate (APR)
The cost credit as an annual rate of a mortgage. It must be calculated by using a formula set by federal law and disclosed to the borrower to aid in comparing different credit plans. All finance charges are included in this calculation, and an APR is always higher than the simple interest rate of the mortgage.
This document is required by the Real Estate Settlement Procedures Act (RESPA) and is an itemized statement of services and charges relating to the closing or settlement of the property transfer. The buyer has the right to examine the settlement statement 1 day before the closing. This is called the HUD – 1 Settlement Statement (named after the standard form).
Escrow and Title Terms
Title Insurance Fee
A one time premium that the buyer pays for protection against loss or damage in the event of an incorrect search of public records or misinterpretation of title. The title insurance policy also shows if the property is subject to taxes, liens, deed restrictions, encumbrances or easements.
The money the buyer pays to the escrow company for preparing paperwork, accounting of all funds, and coordinating information between all parties involved in the sale.
A general term of all estimated charges and fees associated with the transfer of property ownership.
Preliminary Title Report
The report prepared prior to issuing a policy of title insurance that shows the ownership of a specific property, together with the liens and encumbrances which will not be covered under a subsequent title insurance policy.
A property title that has no defects. Properties with clear titles are marketable for sale.
The final steps in the transfer of property ownership. Closing typically occurs at a formal meeting between the buyer, seller, settlement agent, and the buyer’s and seller’s agents. At the closing, the buyer signs the mortgage and mortgage note, the seller receives payment for the property, and the buyer and/or seller pay closing costs. Once accomplished, title is transferred from the seller to the buyer. Also referred to as Settlement.
The total costs of completing the transfer of ownership of the property, other than the purchase price. Typical closing costs include charges for obtaining the mortgage loan such as an origination fee, discount points, appraisal fee, survey, title insurance, legal fees, fees for real estate professionals, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a Buyer’s closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for Seller’s closing costs is 3 to 9 percent.
Cloud On The Title
Any condition which affects the clear title to real property.
Comparative Market Analysis
A method of real estate evaluation commonly used on single and up to four – family homes. This analysis estimates the current market value of a home by comparing it with homes in the area that have recently sold or were offered for sale.
A contingency is a clause in the purchase contract that describes certain conditions that must be met before the contract is binding. The buyer or the seller may include contingencies in the contract for any legal purpose, but both parties must accept the contingencies.
A written document that shows ownership of property. A deed includes the signatures of current owners and a legal description of the property. In most cases, the home buyers receive the deed at the closing of the sale, subject to recording in the public record, when they become the true owners of the home. Also known as the Title.
Usually refers to providing information about a property for sale, especially as it represents actual or potential defects or problems. “Full disclosure” usually refers to the responsibility of the seller to voluntarily provide all known information about the property. Some disclosures may be required by law, as in the case of the federal requirement to warn of potential lead-based paint hazards in pre-1978 housing.
A deposit of money, typically 3% of the purchase offer, which is given by the buyer to bind the offer and which is held in escrow until the sale is closed. If the sale of the property is closed, the earnest money is applied to the purchase price. If the buyer does not complete all obligations of the purchase offer and the sale is not closed, the earnest money may be forfeited. Within the buyer contingency period, if any contingencies are not met to the buyer’s satisfaction, the earnest money is returned to the buyer.
Professional inspection of a home to evaluate the home’s overall quality, safety, and soundness as well as the potential for future problems. Home inspection fees are typically paid by the home buyer.
The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Property (Fixture and Non-Fixture)
In a real estate contract, the property is the land within the legally described boundaries and all permanent structures and fixtures. Ownership of the property confers the legal right to use the property as allowed within the law, such as within the restrictions of zoning or easements. Fixture property refers to those items permanently attached to the structure, such as wall-to-wall carpeting, a sink, or a ceiling light, which transfer with the property.
An outstanding claim or encumbrance on a property that limits the marketability or sale of the property. Sometimes referred to as a cloud on the title.
A final inspection of the property by the buyer and the buyer’s agent, to determine that the property is as described in the purchase agreement. This inspection will confirm that any contingencies specified in the agreement, such as repairs, were completed; that all fixture and non – fixture property is in place; and, if specified in the contract, confirm that electrical, mechanical, and plumbing systems are in working order and that the property is in working order and is “broom clean.” The walk – through typically is conducted right before the closing.