Real Estate Terms

Knowing the following real estate terms can save you money — and maybe even your sanity!

Abstract of Title A history of a particular piece of land, recording liens, restrictions, easements, etc. To be examined by an attorney.

Appraisal The process through which conclusion of the properties value is obtained; also refers to the report setting forth the process of estimation and conclusion of value.

Balloon Payment The final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

Closing Costs and Prepaids Costs paid in addition to the down payment on closing day. These items can include attorney’s fees, loan origination fee ( usually 1 percent of the loan amount), appraisal fee, credit report, document preparation, escrow fee, survey and recording fees, tax escrow, hazard insurance, two months of private mortgage insurance (if down payment is less than 20 percent of the purchase price) and sometimes the entire first year’s private mortgage insurance premium.

Deed Quit Claim This deed conveys only such interest as the seller may have in the property at the time the deed is executed and delivered to the buyer.

Down Payment A specified percentage of a home’s value paid at closing. Usually a down payment is 5 percent, 10 percent, 20 percent, or 25 percent of the house price. Private mortgage insurance is required on amounts less than 20 percent.

First Mortgage A legal document pledging collateral for a loan that has first priority over all other claims against the property except taxes and bonded indebtedness.

Joint Tenancy Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon a death of a joint tenant, his or her interest passes to the surviving joint tenant or tenants by the right of survivorship.

Mortgage An instrument which sets up the conditions of payment for a piece of property already transferred to the buyer.

Negative Amortization The principal balance of the loan actually grows due to payments that are not enough to cover all of the interest due. Often negative amortization accrues during the years of a variable rate or graduated payment mortgage when the payments are less than market rate.

Origination Fee A fee or charge for the work involved in the evaluation, preparation and submission of a proposed mortgage loan.

PITI (Principal, Interest, Taxes and Insurance) The principal and interest payment on most loans is fixed. The tax and insurance portion may be adjusted to reflect changes.

Points Usually paid by the seller, a point is 1percent of the loan balance and is charged by the lender to issue a loan. Points can be a negotiable item between buyer and seller or buyer and lender and usually range from 1 up to 7 or 8. Commonly 1 to 4 points are paid on a conventional loan.

Title An instrument that shows the buyer has a clear ownership. A loan does not usually close until the title company has assured the lender that there are no hidden problems with a title.

Warranty Deed A deed in which the grantor fully warrants good clear title to the premises. Used in most transfers, it offers the greatest protection of any deed.