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GLOSSARY OF TERMS
Points
Sometimes called "discount points." A point is one percent of the
amount of the mortgage loan. For example, if a loan is for $25,000, one
point is $250. Points are charged by a lender to raise the yield on his
loan at a time when money is tight, interest rates are high, and there is a
legal limit to the interest rate that can be charged on a mortgage. Buyers
are prohibited from paying points on Department of Veterans Affairs
guaranteed loans (sellers can pay, however). On a conventional mortgage, or
an FHA insured mortgage, points may be paid by either buyer or seller or
split between them.
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Premium
The payment made by a borrower to the lender for transmittal to HUD to
help defray the cost of the FHA mortgage insurance program and to provide a
reserve fund to protect lenders against loss in insured mortgage
transactions.
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Prepayment
Payment of mortgage loan, or part of it, before due date. Mortgage
agreements often restrict the right of prepayment either by limiting the
amount that can be prepaid in any one year or charging a penalty for
prepayment. The Federal Housing Administration does not permit such
restrictions in FHA insured mortgages.
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Principal
The basic element of the loan as distinguished from interest and
mortgage insurance premium. In other words, principal is the amount upon
which interest is paid.
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Purchase Agreement
See agreement of sale.
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Quitclaim Deed
A deed which transfers whatever interest the maker of the deed may
have in the particular parcel of land. A quitclaim deed is often given to
clear the title when the grantor's interest in a property is questionable.
By accepting such a deed the buyer assumes all the risks. Such a deed makes
no warranties as to the title, but simply transfers to the buyer whatever
interest the grantor has. (See deed.)
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Real Estate Broker
A middle man or agent who buys and sells real estate for a company,
firm, or individual on a commission basis. The broker does not have title
to the property, but generally represents the owner.
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Refinancing
The process of the same mortgagor paying off one loan with the
proceeds from another loan.
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Restrictive Covenants
Private restrictions limiting the use of real property. Restrictive
covenants are created by deed and may "run with the land," binding all
subsequent purchasers of the land, or may be "personal" and binding only
between the original seller and buyer. The determination whether a covenant
runs with the land or is personal is governed by the language of the
covenant, the intent of the parties, and the law in the State where the
land is situated. Restrictive covenants that run with the land are
encumbrances and may affect the value and marketability of title.
Restrictive covenants may limit the density of buildings per acre,
regulate size, style or price range of buildings to be erected, or prevent
particular businesses from operating or minority groups from owning or
occupying homes in a given area. (This latter discriminatory covenant is
unconstitutional and has been declared unenforceable by the U.S. Supreme
Court )
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Sales Agreement
See agreement of sale.
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Special Assessments
A special tax imposed on property, individual lots or all property in
the immediate area, for road construction, sidewalks, sewers, street
lights, etc.
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Special Lien
A lien that binds a specified piece of property, unlike a general
lien, which is levied against all one's assets. It creates a right to
retain something of value belonging to another person as compensation for
labor, material, or money expended in that person's behalf. In some
localities it is called "particular" lien or "specific" lien. (See lien.)
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Special Warranty Deed
A deed in which the grantor conveys tide to the grantee and agrees to
protect the grantee against title defects or claims asserted by the grantor
and those persons whose right to assert a claim against the title arose
during the period the grantor held title to the property. In a special
warranty deed the grantor guarantees to the grantee that he has done
nothing during the time he held title to the property which has, or which
might in the future, impair the grantee's title.
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State Stamps
See documentary stamps
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Survey
A map or plat made by a licensed surveyor showing the results of
measuring the land with its elevations, improvements, boundaries, and its
relationship to surrounding tracts of land. A survey is often required by
the lender to assure him that a building is actually sited on the land
according to its legal description.
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Tax
As applied to real estate, an enforced charge imposed on persons,
property or income, to be used to support the State. The governing body in
turn utilizes the funds in the best interest of the general public.
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Title
As generally used, the rights of ownership and possession of
particular property. In real estate usage, title may refer to the
instruments or documents by which a right of ownership is established
(title documents), or it may refer to the ownership interest one has in the
real estate.
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Title Insurance
Protects lenders or homeowners against loss of their interest in
property due to legal defects in title. Title insurance may be issued to
either the mortgagor, as an " owner's title policy, " or to the mortgagee,
as a "mortgagee's title policy." Insurance benefits will be paid only to
the "named insured" in the title policy, so it is important that an owner
purchase an "owner's title policy", if he desires the protection of title
insurance.
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Title Search or Examination
A check of the title records, generally at the local courthouse, to
make sure the buyer is purchasing a house from the legal owner and there
are no liens, overdue special assessments, or other claims or outstanding
restrictive covenants filed in the record, which would adversely affect the
marketability or value of title.
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Trustee
A party who is given legal responsibility to hold property in the best
interest of or "for the benefit of" another. The trustee is one placed in a
position of responsibility for another, a responsibility enforceable in a
court of law. (See deed of trust.)
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Zoning Ordinances
The acts of an authorized local government establishing building
codes, and setting forth regulations for property land usage.
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