On Good Terms: Common Real Estate, Mortgage and Closing Terminology to Know

How to get the mostWhether you’re on the hunt for a new home, considering a refinancing option or casually browsing the current real estate market, it’s good to have a sound understanding of what certain words or phrases relative to your efforts actually mean. We’ve compiled a list of terms you’ll likely encounter in such situations.

  1. Land Survey: Instrument that describes, maps and documents boundaries and characteristics of a property.
  2. Closing/Settlement: Finalizes the process of transferring ownership of a property from one party to the next.
  3. Closing Costs: Monies paid by buyers and sellers in the final settlement of a real estate transaction.
  4. CD Form (Closing Disclosure Form): Document that presents mortgage particulars, closing costs and detailed financial responsibility of the home buyer.
  5. Title Insurance: Protects the lender’s financial interests (Lender’s Policy) and homeowner’s rights to the property against loss due to title defects.
  6. Title Search: Process of reviewing the title history of a property for defects.
  7. Loan Discount Points: Also known as pre-paid interest. Allows a home buyer to pre-pay interest to lower the interest rate on a home loan. Each point paid equates to 1% of the loan amount.
  8. Mortgage Pre-Approval: Process of becoming approved by a lender to borrow up to a certain loan amount, after submitting financial documents such as bank statements, employment verification and tax returns, among others.
  9. Contingency: Clause included in a real estate contract that enables one or both parties to cancel the transaction based on certain circumstances.
  10. Buyer’s Agent: Real estate agent representing the home buyer(s) and their interests.
  11. Listing Agent: Real estate agent representing the home seller(s) and their interests.
  12. Adjustable-Rate Mortgage (ARM): Mortgage in which the interest rate fluctuates based on market conditions, causing the monthly loan payments to increase or decrease.
  13. Fixed-Rate Mortgage: Mortgage in which the interest rate is fixed over a specified period of time (typically 15 or 30 years).
  14. Loan Origination: Performed by the lender, and encompasses all phases of the loan process, from initial application to release of funds.
  15. Escrow Agent: Third party responsible for holding and maintaining all funds and documents related to a real estate transaction until closing.
  16. Escrow: Type of account established by the lender. Holds a portion of each monthly mortgage payment, the collective funds of which are used to pay property taxes and homeowner’s insurance on an annual basis, or when due.
  17. Home Appraisal: Professional third-party assessment performed to determine the fair market value of a property.
  18. Home Inspection: Professional third-party service designed to determine the current condition of a home. Finding are produced in a document rendered to the lender and home buyer.
  19. Seller Concessions: Certain closing costs paid by the home seller on behalf of the home buyer.
  20. Private Mortgage Insurance (PMI): Type of insurance often required on conventional loans, when the borrowers put less than a 20 percent down payment on a home. Remains in effect until loan-to-value reaches less than 80 percent.
  21. Short Sale: Real estate sale in which the amount received for a home is less than the loan balance. In this case, the lender agrees to accept less than what is owed on the property.
  22. HOA Fees or Assessment: Monthly, yearly or bi-annual fees or one-time payments assessed by a homeowner association, collected for the purpose to maintain, improve, develop or further modify private residential neighborhoods.
  23. Amortization: Describes the payment of a loan over time, through a series of regular monthly mortgage payments.

 

Have questions about other real estate, mortgage or closing terms? Contact our friendly team at Linear Title & Escrow today!

What Are the Most Common Problems Found During Title Search?

If you’re in the process of purchasing a home, you’ll likely hear the term “title search” at some point during the settlement procedure. A title search is an investigation into the history of a property. It’s conducted by the title agency handling the real estate closing, to reveal any and all concerns, defects or other issues regarding title to the property in question.

Seller's Closing Costs

What Are Title Defects?

Title defects are clouds or problems surrounding ownership of the property. Ownership must be transferred from one party to the next in a proper, thorough and legal fashion. When this fails to occur, problems arise – problems that could be costly unless Owner’s Title Insurance coverage is in place.

The Four Most Common Problems Identified During Title Search

We’ve been running title searches for over 12 years. And while there are a number of title defects that can arise (see “23 Reasons You Need Owner’s Title Insurance” on our Title Insurance page for more), there are a handful that seem to cause issues more so than others.

  1. Judgments against prior owners is one of most common categories of title defects we see. Judgment liens and bankruptcies affiliated with the property and unresolved by previous owners can stall closing procedures until legally released.

 

  1. Unreleased deeds of trust are extremely common title problems. An unreleased deed of trust is one that’s still tied to the property, and not yet recorded by the Land Records Department. Fortunately, it’s relatively easy to resolve this type of defect.

 

  1. Incorrect filing of heirs and/or wills that aren’t probated are other title defects that often arise. These types of clouds take a bit longer to resolve, and may involve time in court.

 

  1. Clerical errors happen (we’re all human). A common example of this type of title defect involves legal description of the property (erroneous or omitted information). Depending on the nature and extent of the error, it can take anywhere from days to months to correct these types of issues.

 

Certain title defects may be common, but having an Owner’s Title Insurance policy is the best possible way to protect your home and financial investment. For more on title defects or title insurance questions, contact us today!

 

 

Q: “Can I Choose My Own Title Insurance Company?”

This is a question we’re often asked when preparing for a real estate closing. If you’re looking into buying a new home, be aware that title insurance is typically an important factor in the closing process.

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What Is Title Insurance?

Title insurance is a type of insurance policy that covers the mortgage lender’s interests in the transaction (Lender’s Title Insurance) and your financial investment in the property as the future homeowner (Owner’s Title Insurance). However, it’s important to understand that title insurance on your property doesn’t fall under the blanket protection of a single policy: Lender’s and Owner’s Title Insurance policies are indeed separate policies, each of which carry its own premium.

Lender’s Insurance Is Usually Required. Owner’s Insurance Is Highly Recommended.

Let’s start by saying that purchasing a Lender’s Title Insurance Policy is usually non-negotiable. Most mortgage lenders require homebuyers to have this type of policy to cover their interests in the case of title defect or other issue. But an Owner’s Title Insurance Policy, on the other hand, is entirely optional.

We do, however, strongly advise that you purchase an Owner’s policy, to protect against the loss of your home, further financial responsibilities and time in court in the event that clouds or defects on the title to your home surface in the future. See our page on title insurance to learn more on the benefits of having this coverage.

The Option to Choose Depends on Your State

Since purchasing Owner’s Title Insurance is optional, many homebuyers wish to know if they can choose their own title insurance company, or shop around for the best deal. In some states, this may be allowed. However, Virginia maintains strict regulations over the insurance industry, leading most underwriters to remain competitive in their pricing when it comes to premiums.

Whether you choose a standard or enhanced Owner’s Title Insurance plan, the difference in fees from one insurance provider to the next will likely be negligible. It’s also worth noting that purchasing an Owner’s Policy enables a discount on the Lender’s Policy, known as a “simultaneous discount rate.”

 

At Linear Title & Escrow, we put the interests of the homebuyers and sellers we are privileged enough to work with first. Our process of procuring title insurance involves working with only the most reputable insurance companies in the industry. For more information on title insurance policies or premiums, please contact us today.

 

 

 

 

 

 

 

Title Insurance: Who Needs It, and Why?

What exactly is Title Insurance? Title insurance Policies protect lenders against financial loss and homeowners from the inability to buy or sell a home. They also protect new homebuyers from losing their home after purchase due to title defects.

Pre-approval

Most mortgage lenders these days require homebuyers to purchase a Lender’s Title Insurance Policy. A Lender’s Policy, issued in the amount of the loan, ensures the financial institution backing the mortgage doesn’t incur loss due to title problems. This type of title insurance offers no protection for the the property owner.

While purchasing an Owner’s Title Insurance Policy is entirely optional, there are many, many prudent reasons for doing so. Title problems can date back years, decades even, only to be discovered in the most recent title search. An Owner’s Title Insurance Policy is well worth the cost, and can save you from suffering monetary loss and heartache during the time you own the property and when you go to sell. Why risk your home and financial investment by not having one?

What Happens When a Title Has Defects?

In short, title defects are problems surrounding property ownership. Defects include issues like recording errors on deeds, unreleased liens, unknown or undisclosed heirs, and other encumbrances preventing a clear (or “marketable”) title. When a title is determined to be unmarketable, the property typically cannot be bought, sold or conveyed. Further, the lender will not approve the home loan until a clear title is presented.

Consider the following scenarios:

Example One

You’ve accepted an offer on your home, and are nearly ready to pass the keys on to the next owner. A title search, however, reveals that the previous owner of the property (from whom you purchased) failed to have an ex-spouse sign off on the sale of the home. This ex-spouse, by all legal standards, can still lay claim to the home you are now trying to sell – the sale of which will not take place until this person has signed and relinquished his/her claim to the property. Having title insurance will save you in this situation, particularly from spending considerable time in court, money in legal fees and delayed closing on the sale of your home.

Example Two

The house you are ready to purchase has changed hands numerous times. The more times a deed changes ownership, the greater the chance of recording errors, omissions and other title defects. You decide to purchase an Owner’s Title Insurance Policy. Shortly after closing, it is brought to your attention that a forgery occurred on a past deed of trust. Since you purchased Owner’s Policy, your costs to remove the defect and establish clear title are covered.

Owner’s Title Insurance Tidbits

  • Each policy incurs a one-time premium, payment for which is rendered at closing.
  • Policies are issued on an individual basis and written for the sale price of the property.
  • Owner’s policies cannot be transferred. A new policy must be purchased when the property sells or conveys to a new owner.
  • An Owner’s Policy covers financial loss along with attorney and other litigation fees for defending title on a property.

At Linear Title & Escrow, we work with some of the top Title Insurance underwriters in the industry. For more on title defects or the importance of having an Owner’s Title Insurance Policy, contact our friendly team today!

 

 

What Factors Prevent Clear Title?

magnifying-glass-145942_1280The last thing anyone wants in real estate is to be unable to buy or sell a home because of title problems. Defects, or “clouds,” on title at the very least can stall the real estate transaction, taking anywhere from days to months to resolve. Title companies and their agents work diligently to conduct a title search for each real estate transaction. Unmarketable titles not only prevent proper title transfers – they can be costly to resolve and ultimately result in the inability to sell a property.

Barriers to Settlement: Title Defects

A myriad of factors can prevent clear title and interfere with the closing process. Here are the most common:

  • Unknown or missing heirs
  • False impersonation
  • Liens
  • Prior owner judgments
  • Clerical errors in public records
  • Forgery
  • Fraudulent document execution
  • Inaccurate representation of marital status
  • Improper probation of wills
  • Boundary, survey or easement inaccuracies
  • Unreleased deed of trust

How Are Clouds on Title Resolved?

Resolving defects on title varies, depending on the issue preventing clear title and the circumstances surrounding it. The best way to protect against title problems is to work with a highly experienced title agent, ensure a thorough title search is conducted and purchase Owner’s Title Insurance. In some cases, the courts may need to get involved to “clear” title and render it marketable. In others, liens or judgments must be satisfied, or necessary paperwork completed to remove title defects before closing.

A Word About Title Insurance

Title insurance protects the lender and owner against title defects identified after the transaction closes. Most lender’s require a Lender’s Policy, and buyers are strongly encouraged to purchase an Owner’s policy to insure against significant financial loss. In some cases, the cost of an Owner’s policy may be included in seller concessions. Even if title appears to be “clear,” purchasing title insurance is highly recommended. Visit our title insurance page for additional information.

At Linear Title & Escrow, we are unwavering in our commitment to conduct a thorough title search for each real estate transaction. For help with your title concerns and questions, contact our friendly team today!

What Are the Most Frequently Asked Closing Questions?

The the process of closing on your real estate purchase can be confusing, especially if you’re a first time home buyer. We’ve put together some of the most commonly asked questions surrounding settlement, to help make sense of the closing process.

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Do I need to purchase title insurance? Lenders typically require that you purchase Lender’s Title Insurance, to protect the financial institution’s interest in providing you a home loan. Owner’s Title Insurance is highly recommended, as it protects your financial investment in the property you intend to purchase. Learn more about both types from our title insurance page.

How long does the settlement process take? The entire settlement process depends largely on the type of mortgage, but the average time to close is 30 to 45 days.

Will seller concessions include my title fees? Yes. Title fees typically include items like title search and the Lender’s Title Insurance premium. Costs like these are covered in transactions where sellers contribute to closing costs on behalf of the buyer.

What do I need to bring to the closing table? You’ll need to present your driver’s license or other government-issued ID. Depending on the lender, two forms of identification may be required. You’ll also need to bring a Cashier’s or Certified Check for the amount of your closing costs.

Have other questions? Here at Linear Title & Escrow, we work closely with lenders and agents to make the closing process as simple, streamlined and seamless as possible. For more information on title and escrow, contact our friendly team at (757) 340-0340 today!