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House Location Drawing
A drawing which shows the structures and improvements on a lot in relation to the platted boundary lines, building restriction lines and easements. The drawing may also include a certification that the property is not within a special flood hazard zone.
Mortgage Insurance Premium (M.I.P.)
The premium paid for insurance to protect the lender in the event of a foreclosure where the money collected from the sale of real estate is insufficient to cover the outstanding balance and costs due to the lender. Mortgage insurance is usually required from conventional loans that exceed 80% of the appraisal value of the property and for all Federal Housing Administration (FHA) loans.
A legal instrument constituting a promise to repay money borrowed from a lender. The Note is typically prepared by the lender and delivered to the settlement agent with the closing package. The Note will include the original principal amount of the loan, the initial rate of interest, the maturity date, and it will describe any contemplated changes to the interest rate or due date. The Note will also describe the conditions of repayment and the penalties for failure to comply with its terms.
A fee charged by a lender or mortgage broker to initiate the loan process. This fee is typically referred to in terms of a percentage of the loan amount or “points.”
Common term used in the industry when referring to loan origination fees and discount fees. Each “point” represents one percent (1%) of the loan amount.
Settlement Statement (HUD-1)
The final accounting of all lender’s fees, settlement costs and adjustments paid by or exchanged between the Buyer and Seller. The HUD-1 is prepared on a standardized form by your settlement attorney or agent; it is reviewed and signal by all parties at the settlement table.
The legal term used to describe the form of co-ownership in which real estate title is held by more than one person. The tenancy of co-owners must be specified in the Deed. Joint Tenancy (with right of survivorship) is a form of co-ownership where, upon the death of any joint tenant, title to the property will automatically transfer to the surviving joint tenant(s) (NOTE: each joint tenant must take title to an equal share of the property). Tenancy by the Entirity is a form of co-ownership held by a married couple. Upon the death of either spouse, title to the property will automatically transfer to the surviving spouse. Tenancy in Common is a form of ownership where, upon the death of any tenant in common, the share owned by the deceased does not automatically transfer to the surviving tenant(s) in common, but rather is distributed as part of the estate of the deceased (i.e., as designated in the decadent’s will or as prescribed by state law if the deceased died without a will.)
Insurance which protects the purchaser and the lender against loss or damage resulting from defects of title or the enforcement of liens against real estate existing at the time of issuance. Potential defects covered will include matters that may not be discovered from a search of public records, such as past frauds or forgeries. Title insurance requires one-time premium paid at settlement which protects you for a long as you own the property.
A written opinion of property value by a licensed professional. Appraisals, generally, are not professional statements of the property condition and should not be relied upon as such.
This acronym stands for Adjustable Rate Mortgage. In contrast with a mortgage loan with a fixed rate of interest, the ARM rate will adjust from time to time in accordance with an agreed upon formula. Upon each adjustment, the new payment amount will be calculated by applying the new interest rate to the principal balance amortized over the remaining life of the loan.
Provisions in a mortgage loan that allows for the purchaser of your home to assume the balance of your mortgage and to take over your payments. Most mortgages are not assumable unless the prospective purchasers make application with and are approved by the holder of the existing loan.
An amount which is paid to the lender, at the time of settlement, to reduce the borrower’s monthly payments. The funds are typically deposited with the lender and drawn from in monthly installments over a specified period of years and applied against that would otherwise be the full principal and interest payments on a loan. By applying the cash paid at settlement to the borrower’s monthly payments, the borrower may qualify for a higher loan amount.
Property pledged to the lender to secure the repayment of the loan.
A legal instrument by which an interest in real estate is transferred from one owner to the next. The Deed is prepared by the settlement attorney. It will contain the names of the existing owners as “Grantors” and the new owners as “Grantees” and will describe the property conveyed.
Deed of Trust (Mortgage)
The legal instrument by which real estate is pledged as collateral for a loan. Like the Note, the Deed of Trust or Mortgage is prepared by the Lender and delivered to the settlement agent in the closing package. The Deed of Trust/Mortgage will typically contain many standard terms and covenants. One important condition is that it gives the beneficiary of the Deed of Trust/Mortgage the legal right to foreclose on the real estate pledged as collateral if the other terms of the loan are breached and not cured.
Failure to comply with the terms of the loan documents. A borrower’s default may allow the lender to demand full repayment of the loan immediately or result in foreclosure of the Deed of Trust.
A fee paid to the lender, at of before settlement, to secure a preferred rate of interest on a loan. This fee is generally referred to in terms of a percentage of the loan amount or “points.” Generally, the more discount points paid, the lower the interest rate.
Due of Sale Clause
A standard provision in a note which provides that the note will become due immediately (or may be “accelerated” by the lender) upon the transfer by borrower of any interest in the real estate pledged as collateral for the loan, unless written consent from the lender is obtained.
The extent to which the fair market value (FMV) of the property exceeds the mortgage loan balance. (FMV-Loan Balance=Equity)
Home Inspection Report
A written report of the physical condition of the premises, prepared by a professional inspector. Typically this inspection is ordered by the purchaser to be conducted within a specified time period following contract ratification.