Understanding Home-Buying Terms

Front 1

Amortization

Back 1

A plan that allows you to make regular payments to gradually reduce the principal amount of the debt

Front 2

Appraisal

Back 2

An estimate on the value of property. Professional appraisers, who are familiar with values in the area, provide this service

Front 3

Certificate of Title

Back 3

A written statement prepared by an attorney who has searched official records to determine clear ownership of property

Front 4

Closing

Back 4

The date when the title passes from the seller to the buyer. The formalities of the sale are settled with the signing of papers and paying of closing costs

Front 5

Closing Costs

Back 5

Fees in addition to the price of the property. They include payments for the title search, insurance, appraisal, surveys, attorney, and document preparation. The buyer must pay some fees; the seller pays others. Such fees are paid at the time of closing

Front 6

Commission

Back 6

Money paid to the real estate agent by the seller for finding a buyer and completing a sale. A percentage of the sale price is usually paid.

Front 7

Deed

Back 7

A formal document that transfers the title on property from one owner to another. It contains a detailed legal description of the property.

Front 8

Default

Back 8

Failure by the buyer to make the payments on the property as agreed. Not meeting other conditions of the contract may result in default also. In such situations the lender may take legal steps to get the money due.

Front 9

Depreciation

Back 9

The amount that a house has declined in value due to wear and tear or other conditions of the area

Front 10

Down Payment

Back 10

Money paid by the buyer to the seller at the time that they sign an agreement to sell

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Earnest Money

Back 11

A deposit given to the seller by the potential buyer to show that he or she is serious about buying the property. This is applied to the down payment when the deal goes through. This money can be lost if the deal does not go through unless other legal provisions have been made

Front 12

Equity

Back 12

The amount of property value that totally belongs to the homeowner. This figure is determined by subtracting the unpaid amount of the mortgage loan from the current value of the property. When the loan has been fully paid, the owner has 100 percent equity in the property

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Escrow Funds

Back 13

Money or papers which represent unsettled financial transactions. These are given to a third party to keep until all conditions in a contract are fulfilled

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Foreclosure

Back 14

The taking and selling of mortgaged property in order to obtain payment on the loan when the buyer is in default

Front 15

Interest

Back 15

A charge paid for borrowing money.

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Lien

Back 16

A legal claim placed on property by someone who wants payment for money due him or her by the owner. Liens may be placed on property for unpaid taxes, nonpayment of material or labor costs, as well as other claims

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Mortgage

Back 17

A claim against property given to the lender by the buyer as security for the money borrowed. When mortgage payments are not made, the lender has a legal right to claim the property for sale and payment of the loan.

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Mortgage Note

Back 18

A written agreement to repay a loan

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Mortgagee

Back 19

The lender of mortgage funds

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Mortgagor

Back 20

The borrower of mortgage funds

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Plat

Back 21

A map or chart made by a surveyor to show the exact boundaries of a piece of property

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Points

Back 22

Fees charged by the lender in addition to the amount of the mortgage. A point is 1 percent of the amount of the mortgage loan. For example, a loan of $50,000 would require $500 to be paid for each point charged.

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Principal

Back 23

The basic amount of the mortgage loan, not counting interest and any other additional fees. The amount of interest to be paid is calculated according to the amount of the principal.

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Title

Back 24

Indicates the right of ownership of property and may refer to the document(s) that establish this right

Front 25

Title Insurance

Back 25

Special insurance which usually protects lenders against loss of their interest in property due to unforeseen occurrences that might be traced to legal flaws in previous ownerships. An owner can protect his interest by purchasing separate coverage

Front 26

Title Search

Back 26

A check of legal records to make sure you are buying the house from the legal owner and that there are no liens, overdue special assessments, or other outstanding claims against the property.