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Buyers Expenses Recording Deed and Mortgage Escrow Fees Recording Mortgage Lenders Title Insurance Appraisal and Inspection Survey Charge

Seller's Expenses Title Search Real Estate Commission Owners Title Insurance Closing Fee and Title Exam

The agreement of sale negotiated previously between the buyer and the seller may state in writing who 

will pay each of the above costs.

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.

 

Cloud (On Title)
An outstanding claim or encumbrance which adversely affects the marketability of title.

Commitment Letter

A written promise from a lender that you will receive a mortgage of a specified amount at a specified rate.

 

Comparative Market Analysis (CMA)
A comparison of the prices of recently sold homes that are similar to the subject property in terms of 

location, style and amenities .  Based on this analysis, a real estate broker or salesperson can help the

owner determine a listing price.
 

Conditional Offer
An offer to buy a property, but only under certain circumstances (for example, the buyer receives

financing or sells her old home first).

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 comditions  established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

 

D

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.

E

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 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, 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.

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 Agent

A third party who receives certain funds and documents to be delivered on the performance of certain

conditions outlined in the escrow agreement.

 

F

Fixed-Rate Mortgage 

A loan that carries an unchangeable interest rate over its entire term - typically a period of 15-30 years.

G

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.

Grantee

That party in the deed who is the buyer or recipient.

Grantor
That party in the deed who is the seller or giver.

H

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.

I

Interest
A charge paid for borrowing money. (See mortgage note)

J
 

K

L

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.)

Lock-In
A guarantee - for which you are usually charged a fee - that you will receive a specific rate when you

close your mortgage.

M

Market Value
The price that a home will likely fetch on the market, based on comparisons to similar homes that have

sold recently.

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.

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 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.

N

O

P

PITI
Abbreviation for principal, interest, taxes and insurance, all of which are lumped together in your

monthly mortgage payment.

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
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.

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. 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.
 

Q

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.)
 

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.
 

Recording

The act of entering documents affecting or conveying interests in real estate in the recorder's office

established in each county. Until it is recorded, a deed or mortgage generally is not effective against

subsequent purchasers or mortgages.

Refinancing
The process of the same mortgagor paying off one loan with the proceeds from another loan.

S

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.
 

Survey

The process by which boundaries are measured and land areas are determined; the onsite measurement of

lot lines, dimensions and disposition of a house on a lot, including the determination of any existing

encroachments or easements.

T
 

Tax
As applied to real estate, an enforced charge imposed on persons, property or income, to be used to

support the State. The governing body in turn utilizes the funds in the best interest of the general public.

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 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.
 

Title Report

An examination of the public records to determine what, if any, defects in the chain 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.)

U
 

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