Abstract (Of Title)

A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title. Most lenders require title insurance instead of Abstracts.

Acceleration Clause

Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

Amortization

A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.

Adjustable-Rate Mortgage (ARM)

Loan whose interest rate is adjusted according to movements in the financial market. Many offer lower-than-market initial Interest rates that rise only gradually for the first few years.

Annual Percentage Rate (APR)

Annual cost of credit over the life of a loan including interest, service charges, points, loan fees mortgage insurance and other items.

Appraisal

An expert judgment or estimate of the quality or value of real estate as of a given date.

Assessment

Value placed on the worth of property by a taxing authority such as the City or Town Assessor. Assessments should not be confused with appraisals which are defined above.

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Broker

(See real estate broker)

Building code

Local regulations controlling design, construction and materials used in construction. Building codes are based on safety and health standards.

Building Line or Setback

Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Buydown

A payment to the lender from the seller, buyer, or third party, or some combination of these, that causes the lender to reduce the interest rate during the early years of the loan.

Buyers Agent

A real estate agent who represents only the buyer in a real estate transaction.

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Cap

In adjustable rate mortgages, the limit on how much the interest rate or monthly payment can change.

Certificate of Title

A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination ofthe records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Change Order

Home Buyer's written authorization to add, delete or change an item specified in a building contract.

Closing

Meeting to sign documents that transfer title from a seller to a buyer (also referred to as settlement).

Closing Costs

Charges paid at settlement for obtaining a mortgage loan and transferring a real estate title.

Closing Statement

The statement which lists the financial settlement between buyer and seller, and also the costs each must pay.

Commission

Agent's fee for negotiating a real estate or loan transaction, often expressed as percentage of the sales price.

Cloud (On Title)

An outstanding claim or encumbrance which adversely affects the marketability of title.

Commission

Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price

Condemnation

The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.

Condominium

Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi-unit project.

Contract of Sale

Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

Contractor

In the construction industry, a contractor is one who contracts to build homes or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, and others.

Conventional Mortgage

A mortgage loan not insured by HUD or guaranteed by theVeterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States.

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Default

When a borrower fails to make the required payments of a mortgage note or violates some other provision of the mortgage.

Deed

A formal written instrument by which title to real property is transferred from one owner to another.

Default

When a borrower fails to make the required payments of a mortgage note or violates

Depreciation

Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Down Payment

The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. These funds must be verifiable by lender prior to closing in order to obtain a mortgage loan commitment.

Default

When a borrower fails to make the required payments of a mortgage note or violates some other provision of the mortgage.

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Earnest Money

The deposit money given to the seller or his agent by the potential buyer upon the signing of the offer to purchase to show that he is serious about buying the house.

Easement Rights

A right-of-way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right-of-way across private property is a common example.

Encroachment

An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance

A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive convenants.

Equity

Difference between the value of a home and what is owed on it. A homeowner's equity increases as he or she pays off the mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.

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Fair Market Value

Price at which property is transferred between willing buyer and willing seller, each of whom has reasonable knowledge of all pertinent facts and neither being under compulsion to buy or sell.

Federal Housing Administration (FHA)

Federal agency that insures mortgages with lower down payment requirements than conventional loans.

Fixed-Rate Mortgage

Mortgage with an interest rate that remains constant over the life of the loan.

Foreclosure

A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.

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Grantee

That party in the deed who is the buyer or recipient.

Grantor

That party in the deed who is the seller or giver.

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Hazard Insurance

Protects against damages caused to property by fire, windstorms, and other common hazards.

HUD

U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes.

HVAC

Common building industry abbreviation for heating, ventilation and air conditioning systems.

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Inspection

Examination of work completed on a structure to determine its condition. In the State of Wisconsin, Registered Home Inspectors are licensed to complete these inspections.

Interest

A charge paid for borrowing money. (See mortgage note)

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Lien

A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)

Loan Origination Fee

Lender will charge a fee for the cost of processing the loan, usually calculated as percentage of the loan amount.

Loan To Value Ratio

Relationship between amount of a home loan and the total value of a property.

Lock In Rate

Commitment from a lender to make a loan at a pre-set interest rate at some future date, usually for 30 -60 days. A fee may be charged to "lock-in" a rate.

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Marketable Title

A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.

Mortgage

A lien or claim against real property given by the buyer to the lender as security for money borrowed. The mortgage stays in place until the Mortgage Note is paid in full.

Mortgage Commitment

Formal written communication by a lender agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions.

Mortgage Origination Fee

Charge for the work involved in preparing and servicing a mortgage application, usually charged as a percentage of the loan amount.

Mortgage Insurance Premium

Insurance premium charged when borrower has less than 20% down payment on a home. This policy protects the lender, not the borrower and should not be confused with mortgage life or credit life insurance.

Mortgage Note

A written agreement to repay a loan. The agreement is secured by a mortgage, which serves as proof of an indebtedness. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgagee

The lender in a mortgage agreement.

Mortgagor

The borrower in a mortgage agreement.

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PITI

Principal, Interest, Taxes and Insurance (the four major components of monthly housing payments).

Point

One-time charge assessed by the lender at closing to increase the interest yield on a mortgage loan. Generally, it is stated as a percentage of the mortgage loan amount.

Plat

A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.

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.

Prepayment

Payment of mortgage loan, or part of it, before due date. Mortgage agreements sometimes restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment

Principal

Amount borrowed, excluding interest and other charges.

Property Survey

Survey to determine the boundaries of a piece of property. Cost depends on the complexity of the survey.

Purchase Agreement

(See Contract 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. (Also, see: Warranty deed.)

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Real Estate Broker

The licensee responsible for the real estate company you are working with.

Refinancing

The process of the same mortgagor paying off one loan with the proceeds from another loan.

Restrictive Covenants

Private restrictions limiting the use of real property.

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Sales Agreement

See agreement of sale.

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.

State Transfer Fee

A tax paid to the State of Wisconsin by the seller of a parcel of real estate. The tax is currently $3.00 for each $1,000.00 worth of real estate value transferred.

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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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.

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 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.

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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Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

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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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