Adjustable-Rate Mortgage (ARM)
A type of mortgage where the interest rate remains fixed for an initial introductory period, after which it adjusts periodically based on market conditions. This introductory period can be three, five, seven, or ten years
Appraisal
The estimated fair market value of a property as assessed by an appraiser. This is based on a property’s condition, size, location, and comparable property sales, and helps lenders decide how much they’re willing to loan you based on what the home is worth.
Appraisal Contingency
An appraisal contingency protects the buyer by assuring a property is valued at a minimum specified amount – usually the purchase price. If the property is not appraised for at least the specified amount, the contract can be terminated, and in many cases, the earnest money is refunded to the buyer.
Beneficiary
A person designated to receive an individual’s assets after their death, as outlined in the deceased’s will, trust, or insurance policy.
Boundary Disputes
Disagreements over property boundaries when neighboring property owners have differing interpretations of their respective property lines.
Commitment of title insurance
Completed by the title company on behalf of either the lender or the buyer to ensure the buyer receives a clear title to the property and any outstanding issues are resolved.
Contingency Clause
A contract provision that requires a specific event or action to take place for the contract to be considered valid.
Deed
A legal document that transfers ownership of real estate from one person to another.
Dower Rights
Dower rights refer to the legal rights and interests that a spouse, typically a wife, holds in the property owned by their spouse.
Easements
A type of encumbrance that grants a third party, like government organizations or utility companies, legal rights to use a portion of your property for a specific purpose. These can impact your property’s utility and development potential.
Encumbrances
Any claim, restriction or legal right that a third party has on a property, even though they do not own it. These can limit property ownership rights in some form, whether it has to do with how the property is used or the financial interest in it.
Escrow Officer
A neutral third party who holds onto money and important documents until everything is set for closing. They make sure all conditions are met before transferring ownership.
Escrow Closing
Similar to a face-to-face closing except that all the documents are sent to an escrow agent, who is a third party, with no relationship to either the buyer or the seller or their representatives. In an escrow closing, the parties and their representative do not have to meet — they just send the required documents to the escrow agent, who then examines them to ensure everything is in order, which then affects the settlement and transfer.
Financing Contingency
Also known as a mortgage contingency, this clause says that the buyer must secure financing for the property. While a mortgage preapproval is a strong indicator that financing will be secured, a preapproval signals the start of the home buying process and does not necessarily mean that the buyer is already approved for a mortgage.
Fixed-Rate Mortgage
A type of mortgage that carries a constant interest rate for the life of the loan. Loan terms for fixed-rate mortgages are usually 15 or 30 years, but this depends on the terms agreed upon by the mortgage lender and borrower.
General Warranty Deed
The most comprehensive type of real estate deed. It guarantees that the grantor (seller) has good title to the property and that the property is free from any defects, such as liens or easements.
Home Inspection
A home inspection, including the general home inspection, mold inspection, and wood destroying insect inspection, allows the buyer to get a full picture of the condition of the home being purchased.
Home Sale Contingency
This contingency states that to purchase the contracted property, the seller will need to sell their existing home within a specified amount of time. If unable to secure a buyer, the party may opt to walk away from the sale with earnest money deposit still intact. In the current real estate market, sellers may opt to accept lesser offers without a home sale contingency to have more a “sure” sale of their home.
Home Title Insurance
The home title insurance policy protects the homebuyer’s ownership rights as long as they—or their heirs— have an interest in the home. Just like a homeowner’s policy will protect against loss from theft or fire and wind damage, the home title insurance protects from hidden title hazards that threaten the owner’s financial investment in the home.
Inspection Contingency
An inspection contingency ensures that the buyer can negotiate repairs or the sale price after receiving the home inspection report or even walk away with the earnest money if conditions cannot be met.
Irrevocable trust
A trust that cannot be modified after it was created, unless the beneficiary consents to the modifications. Once the grantor has created the trust, all control is effectively given over to the trustee and they no longer own the assets.
Land Survey
Sometimes required by the mortgage lender or title insurance company to verify that the property they’re lending you money to purchase is as described in legal documents and is suitable as collateral for your mortgage loan.
Lender’s Policy
Title insurance policy purchased by the homebuyer (i.e. mortgage borrower) on behalf of the mortgagee (i.e. mortgage lender) before the home loan is issued.
Liens
This is a type of encumbrance placed on a property to secure the repayment of debts, such as mortgages, unpaid property taxes, or contractor liens.
Limited Warranty Deed
Type of deed guarantees that the grantor has good title to the property from the time they acquired it, but it does not guarantee that the property is free from defects that existed before the grantor’s ownership.
Mortgage Forbearance
Mortgage forbearance allows you to temporarily pause or reduce your mortgage payments, usually for up to 12 months, depending on what you work out with your lender. It’s often a solution during times of financial hardship—like job loss, illness, or other unexpected life events.
Mortgage Interest Deduction
A significant homeowner tax benefits that allows homeowners to subtract the interest paid on their mortgage from their taxable income, potentially reducing their tax bill.
Mortgage Modification
A permanent change of loan terms to make payments more affordable – usually after a major life event like job loss, the death of a spouse, or a natural disaster. This could mean lowering your interest rate, extending the length of the loan, or switching from a variable to a fixed rate. Unlike refinancing, which replaces your loan with a new one, a modification adjusts the one you already have.
Owner’s Policy
Title insurance policy that is usually purchased by the home seller on behalf of the home buyer. This policy protects the property owner against loss or damage in the event there is a covered title defect in your right of ownership to the property for as long as they or their heirs have an interest in the home.
Pre-Approval
A written assessment from a lender that signals they have completed a preliminary check of all aspects of your finances – like your income, debt, and credit. A pre-approval shows you meet the lender’s basic requirements to borrow a specific amount and is a good representation of your borrowing power but is not a final guarantee of it.
Property Tax Deduction
A homeowner tax deduction that allows homeowners to deduct property taxes paid on their primary residence.
Property Title Search
A thorough examination of real estate records completed by the title company to find information about a specific property involved in a real estate transaction. It is used to confirm the property’s rightful legal owner and determine whether or not the property is free of liens and pending lawsuits, and if title ownership is accurately represented by the seller.
Proration
The act of proportionally dividing a cost between buyers and sellers based on time/usage. For example, when a property is sold, taxes need to be prorated between the buyer and seller based on the portion of the year each party owns the property.
Quitclaim Deed
Type of deed gives the grantee (buyer) the least amount of protection. It does not guarantee that the grantor has good title to the property or that the property is free from defects.
Remote Online Notarization (RON)
RON refers to the process of having a state-licensed notary public notarize a document remotely using electronic signature, identity verification, audio-visual and electronic notarial journal and record keeping technologies.
Revocable Trust
Also known as a living trust, a revocable trust is a trust in which the terms can be changed and modified by the grantor after its creation. This can include adding or removing beneficiaries or changing how assets held in the trust should be managed.
Roundtable Closing
A closing where all parties and their representatives meet face-to-face at a specific place and time, usually at an office of one of the party’s representatives, to exchange the documents and to ensure that all necessary steps have been taken so that the buyer can receive marketable title and the seller receives his money.
Seller Net Sheet
A seller’s net sheet is similar to the closing statement sellers (and buyers) receive a few days before the home sale concludes. It’s an itemized tally of all the associated costs and expenses the current homeowner will incur as part of the transaction; set against the sum the buyer is paying for the property.
Seller’s Net Proceeds
The total amount a seller can expect to receive by selling their home after deducting closing costs and existing obligations.
Title
A right to ownership of specific real estate property that includes the right of possession, right of exclusion, right of control, right of enjoyment, and right of disposition. Titles can change hands through a will, court decree, law, or by selling the property. Any time a title is transferred, it is recorded in a deed and filed with county clerks.
Title Contingency
The title report documents the home’s history of ownership. A title contingency will stipulate that the purchase of the home does not go through unless the title report shows that the home is free and clear of any liens. It also is recommended that a buyer purchase title insurance, which protects a buyer in case there is a title dispute on their property by compensating them for any loss and will cover any legal fees related to the dispute.
Title Insurance
A form of insurance that protects you from unforeseen legal and financial title discrepancies, as well as the costs, attorney’s fees, and expenses of defending against any matter insured by the policy. Likewise, title insurance can protect you from financial loss if the sale of your home falls through due to a covered defect in the property’s title.
Title Report
A report prepared by the title company and discloses any information about easements, restrictions, ownership, and liens on the home.
Trust
A legal arrangement created during a person’s lifetime for managing their assets for the benefit of another person – the beneficiary. A trust is a separate legal entity from the person who owns it. It can include assets such as vehicles, bank accounts, stocks, valuable personal items, real estate property, etc. A trust is usually managed by a third person called a trustee, but the grantor can also designate themselves as the trustee.