In this post, we continue our breakdown of title terminology, specifically relating to the Closing Disclosure (CD) form.
Title Terms Continued
Unless otherwise noted, these terms apply to/appear on the buyer’s side of the real estate transaction:
- Title Insurance: Protects parties against financial loss should clouds, liens or other claims on title arise. (See our Title Insurance page for more detailed information.)
- Owner’s Policy: Title insurance covering the homeowner’s interests should a defect on title become apparent.
- Lender’s Policy: Title insurance covering the mortgage lender’s interests in the event of title problems (required by lenders at the expense of the homeowner).
- Settlement/Closing Fee: Amount charged by the title agency/closing attorney to process the close of property sale. (May also appear as “Title Services.”)
- Title Search/Title Exam Fee: Amount charged to research history of title and identify any defects, liens or claims of ownership surrounding the property.
- Recording Fees/Recording Charges: Fees charged to record the transfer of title from one party to the other with the appropriate municipality (split to satisfy that of both the deed and the mortgage).
- City/County/State Tax Stamps: Revenue collected on the sale of a property, generally for the purpose of supporting community improvement initiatives.
- CPL (Closing Protection Letter) Fee: Covers the cost of insurance issued by the title insurer regarding actions carried out by the title agent/underwriter/closer.
- Grantor’s Tax: Amount remitted to the Clerk of Court for recordation of deed (typically paid by the seller).
At Linear Title & Escrow we remain steadfast in our commitment to excellence, providing exceptional service, streamlining communication, and facilitating a smooth and efficient real estate transaction. For more information on the title terms presented in our two-part series or questions regarding the settlement process, please contact us today at (757) 340.0340.
Unless you work directly in the title or settlement business, navigating the murky waters of title terminology is a challenge for most individuals, particularly individuals new to the home-buying experience. Even those well-seasoned in the mortgage or real estate industries often find themselves a bit puzzled on what each line on the Closing Disclosure form truly represents. Here at Linear Title & Escrow, “title terminology” and the meaning behind each individual component are our bread and butter, and we’re more than happy to break it down in a clear, obvious way.
Whether you’re an agent or just looking to better understand the settlement process, brush up on your title terms and their meanings with Part One of our handy little guide.
Know These Terms Before You Buy
- Closing Disclosure Form (CD): A standardized document used to list/itemize credits or fees owed by the buyer (to the mortgage broker or lender) when purchasing or refinancing real estate property.
- Earnest Money: A sum of money (deposit) placed toward a piece of real estate, indicating the intent of the buyer to indeed go through with the purchasing process. This amount is typically applied to the down payment or closing costs.
- Origination Charge: Fee charged by the lender to process the loan application for the purchase or refinance of a property.
- Mortgage Points: A percentage of the loan charged by the lender/broker for the purpose of originating the loan (covers their fees and commissions).
- Mortgage Discount Points/Credits: Prepaid interest remitted by the buyer at closing for the purpose of reducing the mortgage interest rate.
- Adjusted Origination Charges: The loan origination charge less the amount paid in discount points/credits.
- Transfer Taxes: The tax imposed on passing the property title from one party to another, a portion of which is expressed as a percentage of the property value. The percentage amount paid varies per state.
- Mortgage Insurance: Insurance required by brokers/lenders when down payment is less than a pre-determined percentage of the property’s purchase price/refinance amount. (See MIP and PMI terms below for further information.)
- Mortgage Interest Premium (MIP): Applies to all FHA loans and incorporated into the total monthly mortgage payment. MIP is required for the life of the loan while the loan-to-value (LTV) ratio remains greater than 90%, and for 11 years if the initial LTV ratio is 90% or less.
- Private Mortgage Insurance (PMI): Applies to conventional loans when the initial down payment is less than 20% of the property’s purchase price.
- Aggregate Adjustment: Typically, zero or a negative amount. If negative, this figure will reduce the amount the borrower must place into escrow at closing.
Check back soon for the second installment of our title terminology guide in the article, “Title Terms to Know: Part Two.”
Our professional, courteous team at Linear Title & Escrow is always ready to answer your questions regarding the settlement process for your real estate property. Contact us today at (757) 340.3440 to learn more.