The entire home buying process, from mortgage application to closing, can be a bit confusing – especially if you’re a first-timer. But knowing what basic real estate, mortgage and closing terms mean helps keep you in the know throughout the entire process.
We’ve compiled a list of common terminology you’re likely to hear at different points throughout your home buying experience:
-Escrow: When funds and documents from the sale of a property are in “escrow,” a third-party (typically the title company) holds, maintains, and disperses these funds and documents to the appropriate parties during real estate settlement.
-Closing: Closing occurs when all necessary documents regarding the sale of a property are completed by both the seller and buyer sides of the transaction, including transfer of title (ownership), mortgage notes and other necessary financial commitments. This is the final step in the home buying or selling experience.
-Settlement: Settlement refers to the same activities as closing.
-Mortgage Pre-Approval: To be preapproved for a mortgage is to be approved by a bank or mortgage lender for a specific loan amount based on your credit history, income and other pertinent documentation.
-Mortgage Pre-Qualification: To pre-qualify for a mortgage is to receive a general estimate from a bank or mortgage lender on the amount of home loan you can afford, given your current income-to-debit ratio.
-Title: To have title is to own or retain rights to a property. Title is also regarded a deed or formal document indicating ownership of a piece of land or real estate structure.
-Title Defects: Title defects (also referred to as clouds on title or unmarketable title) are issues preventing proper transfer of property ownership from one party to the next. A range of title defects exist, but common examples include forgery, unknown heirs, liens, judgments and recording errors, among others. Any discovered title defects must be resolved, and title declared free and clear, before closing can commence.
-Title Search: A title search is a meticulous process of reviewing legal events surrounding the ownership history of a property. This process seeks to discover any title defects.
–Title Insurance: Title insurance are policy types that protect the mortgage lender (Lender’s Title Insurance) and owner (Owner’s Title Insurance) against financial loss should title defects arise following the closing process.
-Closing Disclosure (CD) Form: The CD Form is a formal document submitted to the buyer by the lender at least three business days prior to closing. This form outlays all financial details of the real estate transaction, including mortgage particulars, anticipated monthly payment amounts, taxes, closing fees and other financial responsibilities associated with the mortgage.
-Earnest Money Deposit: An earnest money deposit is a financial gesture put forth by the buyer, showing the seller that he/she is serious about his/her intent to purchase a property. This amount typically is held in escrow by the title company and applied towards the down payment at closing.
Have other questions about terms surrounding a real estate closing? We have the answers! Contact Linear Title & Escrow today.