1000 South Federal Highway Suite 200 Deerfield Beach
Florida 33441
1-877-94-TITLE (1-877-948-4853)
This glossary is from a fabulous resource provided by Craig Buck.
Please visit his real estate law site.
Please check with your local real estate attorney concerning any contract(s) wording.
Defined words are capitalized
The notes made by a title
examiner based on his examination of the land records. These notes
are a concise summary of the transactions affecting the property. The
title agency produces a BINDER from the information in the abstract.
A condition in a real estate financing
instrument giving the lender the power to declare all sums owing
lender immediately due and payable upon the happening of an event,
such as the sale of the property, or a delinquency in the repayment of
the note.
As a verb, the
confirmation by a party executing a legal document that this is his
signature and voluntary act. This confirmation is made to an
authorized officer of the Court or notary public who signs a statement
also called an acknowledgment.
On an adjustable rate mortgage, the time between changes
in the interest rate and/or monthly payment, typically one, three or five
years, depending on the index.
A claim made against
land titled to another person based on open, notorious and hostile
possession and use of the land to the exclusion of the titled owner.
Is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account point and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
An estimate of the value of property, made by a qualified professional called an "appraiser." Most states require licenses. Various lenders have their own lists of approved appraisers.
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike
a new mortgage where closing costs and new, possibly higher, market-rate
interest charges will apply.
A type of
agency relationship where one person holds a POWER OF ATTORNEY allowing him to execute legal documents
on behalf of another. Decisions made by the attorney in fact are
binding on the principal.
Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
A provision of Federal Law
whereby a debtor surrenders his assets to the Bankruptcy Court and is
relieved of the future obligation to repay his unsecured debts. A
Trustee in Bankruptcy administers the assets, selling them to pay as
much of the debt as possible. If your seller is in bankruptcy, the
Trustee in Bankruptcy owns the property and is the party to sign the
contract and make decisions. After bankruptcy, the debtor is
discharged and his unsecured creditors may not pursue further
collection efforts against him. Secured creditors, those holding
deeds of trust or judgment liens, continue to be secured by the
property but they may not take other action to collect from the
debtor.
A title insurance binder is the
written commitment of a title insurance company to insure title to the
property subject to the conditions and exclusions shown on the binder.
A mortgage covering at least two pieces of real estate as security for the same mortgage.
This sort of loan is more common for commercial property or "special case" loans.
An amount of money, often posted with
the Court, to guarantee against loss as a result of a possible claim.
For example, if there is a LIEN against the
property, the owner may post a bond and the lien is removed from the
property and the parties argue over the money rather than the
property.
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself.
Brokers usually charge a fee or receive a commission for their services.
A required set-back a certain distance from the road within
which no building may take place. This restriction may appear in the
original plat of subdivision, restrictive covenants or by building
codes and zoning ordinances.
When the lender and/or the home builder subsidized the mortgage by
lowering the interest rate during the first few years of the loan. While the
payments are initially low, they will increase when the subsidy expires.
These are sometimes used to qualify borrowers for a loan amount that they
would not otherwise qualify for but will be able to pay in subsequent years as their income increases.
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the
expenses of the income-producing property (mortgage payment, maintenance, utilities, etc.).
Buyer beware. The buyer
must inspect the property and satisfy himself that it is adequate for his
needs. The seller is under no obligation to disclose defects but may
not actively conceal a known defect or lie if asked.
The document given to qualified veterans which
entitles them to VA guaranteed loans for homes, business, and mobile homes.
Certificates of eligibility may be obtained by sending DD-214 (Separation
Paper) to the local VA office with VA form 1880 (request for Certificate of
Eligibility).
A
written opinion by an attorney setting forth the status of title to
the property as shown on the public records. The certificate does not
certify as to matters not of record and affords no protection unless
the author was negligent. Compare, TITLE
INSURANCE.
The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.
Closing costs usually include an origination fee, discount points, appraisal
fee, title search and insurance, survey, taxes, deed recording fee, credit report and notary fees.
The basic
rules establishing the rights and obligations of owners of real
property within a subdivision or other tract of land in relation to
other owners within the same subdivision or tract and in relation to
an association of owners organized for the purpose of operating and
maintaining property commonly owned by the individual owners.
When more than one
insurance company shares the risk of a particular transaction or
series of transactions. Lenders may require co-insurance on large
commercial projects.
Taking of private
property for a public use through exercise of the power of EMINENT DOMAIN. The Constitution protects
against taking without fair compensation.
A system of individual
FEE SIMPLE ownership of portions (units) in
a multi-unit structure, combined with joint ownership of common areas.
Each individual may sell or encumber his own unit. Compare,
COOPERATIVE.
Also called a Committee
or Guardian, a person designated by the Court to protect and preserve
the property of someone who is not able to manage their own affairs.
Examples include the mentally incompetent, minors and incarcerated
persons.
A short-term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses. These are generally done by lenders with offices local to the site of the construction. This enables the lender or their agent to monitor the progress of the construction.
Also known
as a Land Contract or Land Installment Contract. A method of
financing where title remains in the Seller's name until the Buyer has
paid the full purchase price. A Contract for Deed will normally
trigger the DUE ON SALE CLAUSE in a
DEED OF TRUST or MORTGAGE but Veterans Administration regulations
specifically allow Contracts for Deed without invoking the DUE ON SALE CLAUSE.
A system of individual
ownership of stock in a corporation that. in turn, owns the structure.
Each owner has an exclusive right to use his individual unit and must
pay his portion of the debt encumbering the entire building. Compare,
CONDOMINIUM.
A written agreement or
restriction on the use of land or promising certain acts. Homeowner
Associations often enforce restrictive covenants governing
architectural controls and maintenance responsibilities. However,
land could be subject to restrictive covenants even if there is no
homeowner's association.
The ratio, expressed as a percentage, which results when
a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.
The written document conveying real
property. The Deed must be executed (signed), ACKNOWLEDGED, and DELIVERED to the Grantee. Once recorded at the
Courthouse, the original piece of paper is not needed to convey title
in the future.
A voluntary lien to secure a
debt deeding the property to Trustees who foreclose, sell the property
at public auction, in the event of default on the Note the Deed of
Trust secures. Compare, MORTGAGE.
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization
If the
foreclosure sale does not bring sufficient proceeds to pay the costs
of sale and the note in full, the holder of the note may obtain a
judgment against the maker for the difference.
The final, unconditional and
absolute transfer of a DEED to the Grantee so
that the Grantor may not revoke it. A Deed, signed but held by the
Grantor, does not pass title.
Representation of opposing parties (buyer and seller) at the same time in the same transaction. This situation most often refers to cases where the Realtor is the agent for both parties.
A clause in the MORTGAGE that makes the loan non-assumable by providing the
noteholder may call the loan immediately due and payable upon a sale
or conveyance of an interest in the property. The FNMA/FHLMC form
provides that a lease of more than three years or a lease with an
option to buy also triggers this provision.
The right to use the land of
another for a specific limited purpose. Examples include utility
lines, driveways, and INGRESS AND EGRESS. Easements can be temporary
or permanent.
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
The difference between the fair market value and current indebtedness,
also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property.
A form of joint
ownership between an owner/occupant and an owner/investor. The
investor takes depreciation deductions for his share of the ownership.
The occupant receives a portion of the tax write-offs for interest and
taxes and a part of his monthly payment is treated as rent. The
co-owners divide the profit upon sale of the property. Compare, JOINT OWNERSHIP AGREEMENT.
A affiliate of the
Federal Home Loan Bank which creates a secondary money market in
conventional residential loans and in FHA and VA loans by purchasing
mortgage loans from members of the Federal Reserve System and the
Federal Home Loan Bank Systems.
An item of personal property
attached to real property so that it can not be removed without damage
to the real property. A FIXTURE becomes part
of the real property.
The process by which a
lender sells property securing a loan in order to repay the loan.
Under a DEED OF TRUST, foreclosure is by
public auction after appropriate advertisement. A MORTGAGE may require the lender to obtain Court
approval prior to sale.
The owner grants a long-term lease of the land (usually 99 years) and allows the lessee to
build and use the land as agreed. At the end of the term, the land
and all improvements revert to the owner.
One appointed by the Court to
administer the affairs of a minor. A guardian ad litem is appointed
to protect one's interest in a particular legal action. See, CONSERVATOR.
A declaration filed
in the land records that an individual is asserting his homestead
exemption. That exemption allows one to protect some assets (amount
varies by state) against the claims of creditors.
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her gross monthly income. See debt-to-income ratio.
That portion of a borrower's monthly payments held by the lender or
servicer to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as reserves.
A protection against actual
loss or damage as a result of the matter mentioned. An indemnity is
not an absolute guarantee that something won't happen; it states the
terms under which an actual loss will be compensated.
A published interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate mortgage and that
earned by other investments (such as one-, three-, and five-year U.S. Treasury security yields, the monthly average interest rate on loans closed by savings
and loan institutions, and the monthly average costs-of-funds incurred by
savings and loans), which is then used to adjust the interest rate on an
adjustable mortgage up or down.
An
indemnity given to a lender from a title insurance company, agreeing
to be responsible if the closing agent does not follow the lender's
instructions or misappropriates the loan proceeds. Lenders usually
require an insured closing letter be on file for each settlement.
An agreement between owners defining their rights,
ownership, monetary obligations and responsibilities. This could be
between and investor and an occupant or the occupants. If an investor
is involved, the investor does not take depreciation deductions and
none of the occupant's payment is deemed rent for tax purposes.
Compare, EQUITY SHARING.
Two or more persons
own a property. Joint tenants with the common law right of
survivorship means the survivor inherits the property without
reference to the decedent's will. Creditors may sue to have the
property divided to settle claims against one of the owners. Compare,
TENANTS IN COMMON, TENANTS BY THE ENTIRETY.
A loan which is larger (more than $207,000 as of 1/1/96) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
Recorded document showing a pending litigation
filed in the court. These show up on the preliminary title report and must be dealt with when transferring ownership or refinancing.
The loan application is the source of
information on which the lender bases a decision to make the loan;
defines the term of the loan, gives the name(s) of the borrower(s),
place of employment, salary, bank accounts and credit references, and
describes the real estate that is to be mortgaged. It also stipulates
the amount of the loan being applied for and the repayment terms.
The highest price that a buyer would pay and the lowest price a
seller would accept on a property. Market value may be different from the
price a property could actually be sold for at a given time.
A means of describing
land by directions and distances rather than reference to a lot
number. Generally used when land has not been subdivided into lots.
A voluntary lien filed against
property to secure a debt, usually a loan. To foreclose, the lender
must often institute a court action and the borrower may have the
right to reclaim the property after foreclosure. Compare, DEED OF TRUST.
Occurs when your monthly payments are not large enough to pay all the interest due on the loan. This unpaid interest is added to the unpaid balance of the loan. The danger of negative amortization is that the home buyer ends up owing more than the original amount of the loan.
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender. Note: The signed obligation to pay a debt, as a mortgage note.
A loan in default. A loan of which no payments are being made and in danger of resulting in foreclosure.
A written promise to pay a certain sum
of money at a certain time. A negotiable note starts "Pay to the
order of" and is transferable by endorsement similar to a check.
The forced division of land
among parties who were formerly co-owners. A partition suit may ask
to divide the land, or if that is not practical, sell the land and
divide the proceeds.
A lot connected to a
public street by a narrow strip of land. Usually several adjacent
pipestems are combined to form one driveway with each owner having a
mutual-reciprocal easement to use and maintain the driveway to the
street.
Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000).
A written
document authorizing another to act on his behalf as an ATTORNEY IN FACT. One does not need to
be a licensed attorney to act as an attorney in fact, but power of
attorney forms are powerful legal documents that should be used only
under advice of a licensed attorney at law.
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment— as low as 3 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on your loan's structure.
The cancellation of a contract. With respect to mortgage
refinancing, the law that gives the home owner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.
Short for the Real Estate Settlement Procedures Act. RESPA is a federal
law that allows consumers to review information on known or estimated
settlement costs once after application and once prior to or at a settlement.
The law requires lenders to furnish the information after application only.
Dividing land into lots
and streets. The owner signs a PLAT and Deed of
Resubdivision which is recorded among the land records. The state and
county have strict requirements for subdivision of land.
Taking title to property
with a lien but not agreeing to be personally responsible for the
lien, if the holder who forecloses the lien can take the property but
may not collect any money from the owner who took "subject to."
Compare, ASSUMPTION.
A
husband and wife own the property with the common law right of
survivorship so, if one dies, the other automatically inherits. One
may not sue the other to PARTITION the
property. A creditor of one may not claim the property or the
proceeds of sale. Compare, TENANT IN
COMMON, JOINT TENANTS.
Two or more
persons own the property with no right of survivorship. If one dies,
his interest passes to his heirs, not necessarily the co-owner.
Either party, or a creditor of one, may sue to PARTITION the property. Compare, TENANTS BY THE ENTIRETY, JOINT TENANTS.
Insurance that
provides an INDEMNITY against loss or damage
as a result of defect in title ownership to a particular piece of
property. Title insurance covers mistakes made during a TITLE SEARCH as well as matters which could
not be found or discovered in the public records such as missing
heirs, mistakes, fraud and forgery. Compare, CERTIFICATE OF TITLE.
An examination of the
public records, including court decisions, to disclose facts
concerning the ownership of real estate. The title examiner prepares
an ABSTRACT and the title agent prepares a BINDER but decisions regarding the legal
sufficiency of title or questions requiring legal interpretation must
be resolved by a licensed attorney at law.
A mortgage in which the borrower receives a below-market
interest rate for a specified number of years (most often five or seven), and
then receives a new interest rate adjusted (within certain limits) to market
conditions at that time. the lender sometimes has the option to call the loan
due with 30 days' notice at the end of five or seven years.
The decision whether to make a loan to a potential home buyer
based on credit, employment, assets, and other factors and the matching of
this risk to an appropriate rate and term or loan amount.
A long-term, low- or no-down-payment loan guaranteed by the Department
of Veterans Affairs. Restricted to individuals qualified by military service
or other entitlements.
The debt secured includes
an existing debt already on the property. The payments made to the
holder of the wraparound include payments due on the existing loan and
the holder must forward the appropriate portion of each payment to the
existing noteholder. Often used to avoid a PREPAYMENT PENALTY or a DUE
ON SALE CLAUSE. Can refer to a wraparound DEED OF TRUST or CONTRACT FOR
DEED.
