Catch The Title Wave!

Glossary

Atlantic Title Company and our predecessor offices have been assisting Maryland Home Buyers with locating purchasing, selling and refinancing since 1952. We pride ourselves in our thoroughness during the settlement and title process and have provided this glossary of real estate terms so as to help you better understand the settlement process.

Abstract of Title: A summary of the public records relating to the title to a particular property. An Attorney at Atlantic Title Company will examine the abstract to determine whether there are any title problems or defects which must be cleared before you as a buyer can purchase clear, marketable and insurable title.

Agreement of Sale: Also known as contract of sale. This is the legal document in which the seller agrees to sell and the buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.

Adjustable Rate Mortgage (ARM): A mortgage in which interest and payment rates vary periodically, based on a specific index.

ALTA: American Land Title Association. A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

Amount Financed: The loan amount available after payment of the upfront charges.

Amortization:   A payment plan which allows the borrower to reduce his or her debt gradually through monthly payments of principal and interest.

Annual Percentage Rate (APR): Not to be confused with your interest rate. This is the cost to borrower money expressed as a yearly percentage. It includes the interest rate plus other charges or fees.

Application: The submission of a consumer’s financial information for purposes of obtaining an extension of credit.

Appraisal: A professional and unbiased written report estimating the value of property based on recent, comparable sales, quality of construction, current condition.

Assessed Value: The value placed on property by the County Property Appraisers office as a basis for taxation.

Balloon Mortgage: A mortgage that has level monthly payments that would fully amortize over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.

Bi-weekly Mortgage: A mortgage with payments due every two weeks, totaling 26 payments a year.

Borrower: A person (also known as mortgagor) who receives funds in the form of a loan with an obligation to repay principal balance with interest.

Business Day: Defined differently for the Loan Estimate vs the Closing Disclosure. For the loan estimate, a business day is a day on which the creditor’s (lender’s) offices are open to the public for carrying out substantially all of its business functions. For the Closing Disclosure (CD) and revisions or corrections, a business day means all calendar days except Sundays and legal public holidays specified in 5 U.S.C. 6103 (a).

Chain of Title: A history of conveyances and encumbrances affecting the title of real property.

Closing: Also known as settlement. The final method in which documents are signed and recorded, and the sale is completed.

Closing Costs: Money paid by the buyer and/or seller at the closing.   In general, all fees, taxes, charges, commissions and other costs and fees required to be paid to transfer the property and borrow or sell the property.

Closing Date: The date of consummation for the Closing Disclosure.

Closing Disclosure (CD): Under the TILA-RESPA Integrated Disclosure Rule, the form is provided to consumers that outlines all of the final costs and terms of the transaction and compares them to the figures provided on the initial loan estimate form. This form combines what was previously contained in the HUD-1 and the final Truth-in-Lending disclosure (TIL). This form will be given to the consumer three (3) business days before closing.

Consumer: The borrower/buyer.

Consummation: This occurs when the consumer becomes contractually obligated to the creditor (lender) on the loan.   Consummation is not the same as closing or settlement.

Courier Fee: Charges for delivery.

Creditor: The creditor in a mortgage transaction is your mortgage lender. This is the company giving you the money for the loan, and setting the terms and conditions of that loan.

Date Issued: The date the disclosures (loan estimate and closing disclosure) are delivered to the consumer.

Deed: The legal document conveying title to the real property.

Deed of Trust: An instrument used in many states in place of a mortgage. A legal document that provides security for repayment of a promissory note.

Disbursement date: The date the amounts are to be disbursed to a consumer and seller in a purchase transaction or the date funds are to be paid to the consumer or a third party in a transaction that is not a purchase transaction.

Discount Points: Charges paid to the lender voluntarily by the borrower or seller, to reduce the interest rate.

 Earnest Money (Deposit): Money deposited by the buyer as evidence of intention to demonstrate the good faith of the buyer to complete the purchase. Earnest money is applied against the purchase price at closing; however, it may be forfeited if the buyer fails to complete the purchase pursuant to the terms of the contract of sale.

Easement: A recorded right of use affecting the real property.

Encumbrance: Anything that affects or limits the ownership of real property, such as mortgages, liens, leases, easements or restrictions.

Equity: The ownership interest; the portion of a property’s value over and above the liens against it.

Fair Market Value: The price a willing buyer and willing seller would arrive at after an arm’s length bargaining where there is no compulsion to buy or to sell and where both parties are aware of all relevant facts.

Fee Simple: The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one’s heirs.

Finance Charge: The dollar amount the loan will cost the consumer.

First Mortgage: A real estate loan that has priority over any subsequently recorded mortgages.

Fixed Interest Rate Mortgage: A mortgage in which the interest rate and monthly payments remain the same for the life of the loan.

Good Faith Estimate (GFE): For purchase and refinance applications taken after October 3, 2015, customers receive a Loan Estimate within 3 business days of application outlining the approximate costs and terms of the loan.

Hazard Insurance: A contract with an insurance provider that specifically covers damage to a property due to certain hazards such as fire.

Home inspection: A form inspection of the home’s structure, mechanical systems and overall condition usually performed by a licensed professional inspector.

Homeowner’s Association Dues: The fees imposed by a condominium or homeowners’ association for maintenance of common areas.

Homeowner’s Policy: A hazard insurance policy covering at the very least the appraised value of the house and property.

IMD: Integrated Mortgage Disclosure. The new rule and forms apply to most closed end consumer mortgage loans. It does not however, apply to home equity lines of credit, reverse mortgages, or mortgage loans secured by a mobile home or by a dwelling that is not attached to real property. The new rule does not apply to loans made by a creditor (lender) who makes five or fewer mortgages in a year.

Interest: Amount of money paid for the use of funds provided by another party.

Interest Rate: The percentage of an amount of money that is paid for its use for a specified period of time.

Issue Date on LE or CD: The date you deliver or place in the mail the applicable disclosure.

Joint Tenancy:   Ownership of property by two or more people. Upon death of a joint tenant, the interest passes to the surviving join tenant(s), rather than to the heirs of the deceased tenant.

Judgment: Final determination by a court of law.

Legal Description: The description of a parcel of land, identified by metes and bounds, or designated as a Lot and/or Block number.

Lien: An encumbrance for money against property.

Loan estimate (LE): A document delivered or mailed to customers by a lender within 3 business days of mortgage application. The Loan Estimate provides an estimate of closing costs and fees as well as the loan terms.

Marketable Title: Title which is free from any encumbrance that would limit or prevent its sale.

MIC: Mortgage Insurance Case Number.

Mortgage: The transfer of an interest in real property, given as security for the repayment of a loan.

Mortgagee: The party lending the money.

Mortgagee’s Title Policy (Lender’s title policy): An insurance policy required by the mortgagee to protect the mortgagee’s interest against loss caused by title defects. It does not protect the buyer.

Mortgagor: The party borrowing the money.

Notary Public: A person legally empowered to witness or certify the validity of signatures on documents.

Note: A general term for any kind of paper or document signed by a borrower that is an acknowledgment of a debt. It is the agreement by the borrower to repay that debt.

Owner’s Title Insurance Policy: A policy that insures the buyer against loss due to any defect of the title, not excepted or excluded from the policy.

Payoff: The amount that will pay off a loan in full.

Planned Unit Development (PUD): A comprehensive development plan for a large land area.

Quit Claim Deed: A deed passing any interest, claim or title the grantor may have in the property to the grantee, without warranty of defects in title.

Refinancing: The repayment of a debt from the proceeds of a new loan using the same property as security.

Reissue Rate: A reissue rate is a reduced rate for title insurance that a homeowner may be eligible for on a refinance.

RESPA: Real Estate Settlement Procedures Act is a consumer protection act aimed at making consumers better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.

Restriction: As to title, this would mean any limitation on the right of use of property.

Second Mortgage:   A mortgage that has rights that are subordinate to the rights of the first mortgage holder.

Short Sale: An alternative to foreclosure wherein the lender agrees to accept some amount less that the outstanding principal owed on real property so that the owner/borrower can sell the property.

Survey:   A House location survey locates the house and improvements inside of the property line but does not locate the exact dimensions. A stake survey is one in which a surveying company goes out to the property and locates the exact property line and sets stakes in the property to mark the boundaries.

Tenants by the Entireties: The default ownership interest for married couples, automatically includes the right of survivorship in the surviving spouse.

Tenants in Common: A type of joint tenancy of property without right of survivorship, each tenant’s portion of ownership is separately owned and each owner may do with their share as they see fit without regard for the other tenants.

TILA (Truth in Lending): Originally designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and costs.

TILA-RESPA Rule: The rule finalized by the Consumer Financial Protection Bureau with new, integrated mortgage disclosures. The rule also provides a detailed explanation of how the forms should be completed and used.

TIP: Total interest percentage referred to on the TILA-RESPA Integrated Disclosure that is the total amount of interest a consumer will pay over the loan term as a percentage of the loan amount.

Title: The legal evidence of ownership rights to real property.

Title Company: The company that confirms the legal owner of a property and insures a homeowner and lender against a loss that could result from a title dispute.

Title Insurance: An insurance policy that protects a lender or homebuyer. The protection for the buyer is called the owner’s title insurance policy. It protects the owner against lass resulting from a title error or dispute.

Title Insurance Policy: A contract in which an insurer, usually a title insurance company, agrees to pay the insured party a specific amount for any loss caused by defects of title on real estate in which the insured has an interest as purchaser, mortgagee or otherwise.

Title Report: A report detailing the condition of title to real property. A title report is generally used to determine a property’s marketability by identifying outstanding liens, judgments and/or other clouds on title in preparation of sale of the property.

Title Search: An examination of public records to disclose the past and current facts regarding the ownership of a given piece of real estate.

 Total Payments: Total amount paid after payment of all principal, interest, mortgage insurance and loan costs as scheduled.

 TRID: TILA-RESPA Integrated Disclosures.

TRID Rule: Consolidates four existing disclosures required under TILA and

RESPA for closed end credit transactions secured by real property into two forms; a Loan Estimate (LE) that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure (CD) that must be provided to the consumer at least three business days prior to consummation.

Transfer Tax: State and Local tax payable when the title passes from one owner to another.

Variance: Previously known as tolerance.

Warranty: Protection that can be provided to the purchaser regarding the condition of certain property.

Underwriting: Analysis of risk and setting of appropriate rate and terms for a mortgage on a specific property for specific borrowers.

Zoning: An act by municipality authorities specifying the type of use for which a property may be used.

Jeffrey T. Bald, Esq. President
192 Duke of Gloucester St. • Annapolis, MD 21401
(410) 267-9300 • (410) 269-1900 office • (410) 269-6477 fax
contact@atlantictitlecompany.com

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