Most states have laws which permit someone to claim ownership of property which is occupied by him for a number of years. This is common where a fence is erected over a boundary line (called an “encroachment”) with out the objection of the rightful owner. After a number of years, the person who erected the fence may be able to commence a court proceeding to declare that the property belongs to him.
To reduce a debt by regular payments of both principal and interest.
The value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.
An adjustable rate mortgage – that is, a loan whose interest rate may adjust over time depending on certain factors or a predetermined formula.
Assignment of Contract
A process by which a person sells, transfers, and/or assigns his rights under an agreement. Often used in the context of the assignment of a purchase contract by a buyer or the assignment of a lease by a tenant.
A note calling for periodic payments that are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as “balloon” is due at maturity.
Profit from the sale of a “capital” asset, such as real property. A long – term capital gain is a gain derived from property held more than 12 months. Long-term gains can be taxed at lower rates than short-term gains.
Chain of Title
The chronological order of conveyance of a parcel of land from the original owner to the present owner.
In community property states (CA, LA, TX, WI, ID, AZ, NV, NM, WA), all property of husband and wife acquired after the marriage is presumed to belong to both, regardless of how it is titled.
The dependence upon a stated event which must occur before a contract is binding. Used both in the context of a loan and a contract of sale.
Decrease in value to real property improvements caused by deterioration or obsolescence.
Due on Sale Clause
A provision in a mortgage or deed of trust that gives the lender the option to require payment in full of the indebtedness upon transfer of title to the property (or any interest therein).
An interest that one has in the land of another. May be created by grant, reservation, agreement, prescription, or necessary implication.
A constitutional right or a governmental authority to acquire private property for public use by condemnation, and the payment of just compensation.
Construction of imposition of a structure onto the property of another.
A claim, lien, or charge against real property.
The difference between the market value of the property and the homeowner’s mortgage debt.
Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event.
That portion of a borrower’s monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments, and other items as they become due. Also known as “impounds.”
The highest form of ownership. An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Also known as “Fee” or “Fee Simple Absolute”.
A proceeding to extinguish all rights, title, and interest of the owner(s) of property in order to sell the property to satisfy a lien against it. About half of the states use a “mortgage foreclosure,” which is a lawsuit in court. About half use a “power of sale” proceeding which is dictated by a deed of trust and is usually less time consuming.
Good Faith Estimate
A lender’ s estimate of closing costs and monthly payment required by R.E.S.P.A.
Homeowner’ s Association
An association of people who own homes in a given area for the purpose of improving or maintaining the quality of the area. Also used in the context of a condominium association.
An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon death of a joint tenant the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
An encumbrance against property for money, either voluntary (mortgage), involuntary (judgment), or by operation of law (property tax lien).
A legal notice recorded to show pending litigation relating to real property and giving notice that anyone acquiring an interest in said property subsequent to the date of the notice may be bound by the outcome of the litigation. Often filed prior to a mortgage foreclosure proceeding.
Title which can be readily marketed to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.
Mechanic’ s Lien
A lien created by state law for the purpose of securing priority of payment for the price of value of work performed and materials furnished in construction of repair of improvements to land that is attached to the land as well as the improvements.
A security instrument given by a borrower to secure performance of payment under a note. The document is recorded in county land records, creating a lien (encumbrance) on the property. Also known as a “deed of trust” in some state. The borrower is also called a “mortgagor.”
Insurance required for loans with a loan-to-value ratio above 80%. Also called “PMI” or “MIP”.
A written promise to repay a certain sum of money on specified terms. Also known as a “Promissory note”.
To divide in proportionate shares. Used in the context of a closing, at which such as property taxes, interest, rents, and other items are adjusted in favor of the seller, buyer, or lender.
Quit Claim Deed
A deed by which the grantor gives up any claim he may have in the property. Often used to clear up a cloud on title.
The act of publicly filing documents, such as deeds or mortgages.
The repayment of a loan from the proceeds of a new loan using the same property as collateral.
An instrument releasing a lien or encumbrance (for example, a mortgage) from a property.
Real Estate Settlement Procedures Act – a federal law requiring disclosure of certain costs in the sale of residential property that is to be financed by a federally insured lender. It also requires that the lender provide a “good faith estimate” of closing costs prior to closing of the loan.
A loan secured by a mortgage or trust deed in which the lien is junior to a first mortgage or deed of trust.
A document under which collateral is pledged (e.g. mortgage).
A statement prepared by a closing agent (usually a title or escrow company) giving a complete breakdown of costs and charges involved in a real estate transaction. Required by RESPA on a form HUD-1.
The process by which a lien holder agrees to permit his lien to become junior or “subordinate” to another lien.
Title is the evidence of ownership. In essence, title is more important than ownership because having proper title is proof of ownership. If you have a problem with your title, you will have trouble proving your ownership, and thus selling or mortgaging your property.
An insurance policy that protects the insured (purchaser and/or lender) against loss arising from defects in title. A policy protecting the lender is called a “Loan Policy,” whereas a policy protection the purchaser is called an “Owner’s Policy.” Virtually all transactions involving a loan require title insurance.
Truth in Lending
Federal law requiring, among other things, a disclosure of interest rates charges and other information about a loan.
A deed under which the seller makes a guarantee or warranty that title is marketable and will defend all claims against it.
Yield Spread Premium
A “kickback” from the lender to the mortgage broker for the additional profit made from marking up the interest rate on a loan.