Definitions of Commonly Used Title Insurance Terms
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Abstract of Title
A condensed history or summary of all transactions affecting a particular tract of land
Affidavit
A sworn statement in writing.
All-Inclusive Title insurance
This means that most title insurance charges are included in one price.
Amortize
To reduce a debt by means of regular periodic payments which include amounts applicable to both principal and interest.
APR
Annual percentage rate. On some mortgages the APR is higher than your actual mortgage rate.
Assessed Value
Dollar Value to property for purposes of assessing taxes.
Assessor
A local government official who determines the value of a property for taxation purposes.
Assumable Mortgage
A type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.
Assumption
A mortgage that allows a new owner to take over payments. The original borrower remains liable on the mortgage note.
Closing Statement
A document commonly used in real estate transactions, detailing the fees, commissions, insurance, etc. that must be transacted for a successful transfer of ownership to take place. This document is prepared by a closing agent and is also known as a "settlement sheet"
Conveyance
A written instrument, such as a deed or lease, that transfers some ownership interest in real property from one person to another.
Conveyance Tax
A tax imposed on the transfer of real estate property.
Deed
A written document by which the ownership of land is transferred from one person to another.
Deed of Trust
Instrument used to secure a loan on real estate. Like a mortgage, generally used in the South. The major difference is in how foreclosures are handled. Foreclosures are much faster with a Deed of Trust than with a Mortgage.
Deposit or Earnest Money
Advance payment of part of the purchase price to bind a contract for property.
Due-on-Sale Clause
A provision in a mortgage or deed of trust which requires the loan to be paid in full if a property is sold or transferred.
Equity
The interest or value which an owner has in real estate over and above the debts against it.
Escrow
(1) A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer.
(2) Money that is kept by the mortgage company to ensure that taxes can be paid in full when due. This is paid up front on settlement sheet lines 1001 - 1006 and is added to the mortgage payment monthly over the principal and interest figure.
Fair Market Value
The price that a given property or asset would fetch in the marketplace, subject to the following conditions:
Given these conditions, an asset's fair market value should represent an accurate valuation or assessment of its worth.
FNMA (Fannie-Mae)
The Federal National Mortgage Association, a federally sponsored private corporation which provides a secondary market for housing mortgages.
Fixed Rate Mortgages
Mortgages with a fixed interest rate. You payment for principal and interest will not change for the life of the loan. Your monthly payment may change if taxes or insurance rates change.
FHA
The Federal Housing Administration. An agency of the federal government which insures private loans for financing of new and existing housing and for home repairs under government approved programs.
FHLMC (Freddie Mac)
Federal Home Loan Mortgage Corporation. An affiliate of the Federal Home Loan Bank, which creates a secondary market in conventional residential loan and FHA and VA loans by purchasing mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.
Foreclosure
Legal process by which a mortgagor of real property is deprived of his interest in that property due to failure to comply with terms and conditions of the mortgage.
Grantee
A person who acquires an interest in land by deed, grant or other written instrument.
Grantor
A person who, by a written instrument, transfers to another interest in land.
Hazard Insurance
The homeowner's insurance policy.
Heir
One who might inherit or succeed to an interest in lands under the rules of law applicable where an individual dies without leaving a will.
In Personam
Directed at specific persons rather than against property or generally for all people.
In Rem
Pertaining to property or people in general.
Inside Lot
Not a corner lot.
Interest Only Payments
A mortgage where only the interest is paid on a monthly basis. This means that the buyer gets no equity. This is only used on some purchase money mortgages where the buyer is responsible for paying the seller the entire amount of the second mortgage at some time in the future.
Instrument
A written document.
Judgment
A decree of a court.
Joint Tenants with Rights of Survivorship
is a form of ownership of an asset by two or more people in which the survivor becomes the sole owner after the death of the other person
Loan origination fees
Money required by the lender to be paid to start the work of approving a mortgage.
Lien
A hold, a claim or charge allowed a creditor upon the lands of a debtor.
Like-Kind Property
Any two assets or properties that are considered to be the same type, making an exchange between them tax free. To qualify as like kind, two assets must be of the same type (e.g. two pieces of residential real estate), but do not have to be of the same quality.
Mortgage Note
An instrument used to encumber land as security for a debt. This document gives the mortgage company "in rem" jurisdiction over the mortgagor.
Mortgage Servicing Rights (MSR)
An agreement to service mortgage loans in which the person assigned to servicing the loan performs specific administrative duties. Some of these duties include collecting monthly payments, maintaining escrow accounts and managing hazard insurance.
Mortgagee
A designation for the mortgage lender on lands.
Mortgagor
A designation for the mortgage borrower on lands.
MIP
Mortgage insurance protection
Negative Amortization
The increase in the balance of a loan caused by interest payments being larger than the re-payments on the loan. On adjustable-rate mortgages, if the monthly payments are not enough to cover both the interest and principal payments on the loan, the shortage is added to the principal. This situation occurs when the mortgage payments reach the maximum (as defined by the loan agreement) while the interest rate on the loan is increasing.
Negative Equity
When the value of an asset falls below the outstanding balance on the loan used to purchase that asset. Negative equity is calculated simply by taking the value of the asset less the balance on the outstanding loan.
Non-Amortising Loan
A type of loan in which payments on the principal are not made, while interest payments of minimum payments are made regularly. As a result, the value of principal does no decrease at all over the life of the loan. The principal is then paid as a lump sum at the maturity of the loan.
Note
A written promise to pay a certain amount of money, at a certain time, or in a certain number of installments. It usually provides for payment of interest and its payment is at times secured by a mortgage.
The mortgage note document gives the mortgage company "in rem" jurisdiction over the mortgagor.
The promissory note document gives the mortgage company "in person" jurisdiction over the mortgagor.
P.O.C.
Paid outside of closing. Sometimes the lender requests this money before settlement. If you pay any charges before settlement they should be written on the settlement sheet. They are written on the proper line outside of your column. They should also be marked P.O.C.
Point
A percentage point. Equal to one percent of the loan amount.
Power of Attorney
An instrument authorizing another to act on one's behalf as his agent or attorney.
Private Mortgage Insurance (PMI)
Provided by private mortgage insurers to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for loans with a loan-to-value percentage in excess of 80%. This allows the borrower to make a smaller down payment of as low as 3%, instead of about 20%, and usually requires an initial premium payment and possibly an additional monthly fee depending on the loan's structure.
PMM
Purchase money mortgage. A mortgage given by the seller simultaneously with the purchase of real estate to secure the unpaid balance of the purchase price.
Pro-Rate
To allocate between seller and buyer their proportionate share of an obligation paid or due.
Promissory Note
A promise to pay. The promissory note document gives the mortgage company "in personam" jurisdiction over the mortgagor.
Real Property
Land and that which is affixed to it.
Reissue Rate
A reduced rate of title insurance premium applicable in cases where the owner of the land has been previously insured in an owner's policy by the insurer within a certain time.
Reverse Mortgage
A special type of loan used to convert the equity in a home into cash. The money obtained through a reverse mortgage is usually used to provide seniors with financial security in their retirement years.
Second Mortgage
A mortgage, the lien of which is subordinate to that of another mortgage.
Section 1031
A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes. Taxes on capital gains are not charged upon sale of a property if the money is being used to purchase another property. The payment of tax is deferred until property is sold with no re-investment.
Section 1245
A part of the IRS code stating that depreciable property that has been sold at a price in excess of depreciated or salvage value may qualify for favorable capital-gains tax treatment
Section 1250
A section of the IRS code stating that a gain from selling real estate that has been subjected to accelerated depreciation should be treated as ordinary income instead of a capital gain.
Subordination Clause
A clause in an agreement which states that the current claim on any debts will take priority over any other claims formed in other agreements made in the future. Subordination is the act of yielding priority.
Survey
The process of measuring land to determine its size, location and physical description and the resulting drawing or map.
Tax Service Fee
A fee paid to the mortgage company to verify that they actually pay the real estate taxes.
Tenants By Entirety (TBE)
When a property is owned by two or more tenants. If one owner dies, the survivor takes the whole estate
Tenants In Common (TIC)
When a property is owned by two or more tenants. If one owner dies, the other does not automatically take the entire estate.
Title
The evidence or right a person has to the ownership and possession of land.
Title Insurance
Insurance against loss or damage resulting in defects or failure of title to a particular parcel of real property.
Title Insurance Binder or Commitment
A report issued by a title insurance company binding or committing the title insurance company to issue the form of policy designated in the commitment or binder upon compliance with and satisfaction of requirements set forth in the commitment or binder.
Title Search
An examination of public records and court decisions to disclose the current facts regarding ownership of real estate.
Transfer taxes
Money paid to the county and or state when property is sold.
VA
The Veterans Administration. They insure mortgages.
Will
A written document properly witnessed, providing for the distribution of property owned by the deceased.
