Home Buying Terms
Amortization
Payment of a portion of the principal of a loan (such as a mortgage loan) at the time of each payment (which includes principal, interest, and miscellaneous items).
Binder
A receipt for earnest money or a deposit paid to secure the right to purchase a home at terms that have been agreed upon by both buyer and seller.
Closing Costs
These are charges paid at settlement to obtain a mortgage loan and transfer real estate title. Usually they are in addition to the price of the home. Be sure your sales contract clearly states who - buyer or seller - will pay each of these costs, and what they will be.
Closing Day
The date on which the title properly passes from the seller to the buyer and/or the date on which the borrower signs the mortgage loan agreement.
Earnest Money
A sum paid to a seller by a potential buyer to demonstrate that the buyer is serious about buying. If a contract is executed, the "earnest money" is applied against the down payment; if not, the "earnest money" is returned in whole or with deduction for processing charges, paper work, etc. Make sure you know the terms of your contract.
Easements
Right of way granted to persons or companies, authorizing access to or over the owner's land. For example, utility companies may have easement rights to install pipes or wires on or over your land.
Equity
That value in excess of all indebtedness against the property.
Escrow
A system or document transfer in which a deed, bond, or funds is delivered to a third person to hold until all conditions in a contract are fulfilled.
FHA - Federal Housing Administration
This federal agency, established by Congress in 1934, insures mortgage loans made by FHA-approved lenders on homes that meet FHA standards in order to make mortgages more desirable investments for lenders.
Interest
The cost paid by a borrower for use of money borrowed to purchase a home.
Mortgage
Pledge of property as a security for the payment of a debt.
Mortgage Loan
A contract in which the borrower's property is pledged as collateral and which can be repaid on an installment basis (usually monthly) over a long period of time. The mortgager (the buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes, and to keep the property in good condition.
Mortgagee
The lender who has agreed to lend money to the mortgagor.
Mortgagor
The homeowner (borrower), who has agreed to repay a mortgage loan to the mortgagee.
Note
A formal document showing the existence of a debt and stating terms of repayment.
Points
A "point" is a charge of one percent of the mortgage value. "Points" are a one-time charge assessed by the lender to increase the interest yeild from the mortgage loan to a position competitive with the interest yield from other types of investments. The government prohibits the buyer from paying "points" on VA insured mortgage loans; "points" must be paid by the seller. "Points" on FHA-conventional mortgage loans may be required by the lender, buth there are no regulations as to who pays them. However, the "point system" arrangements vary from state to state, so check into practices in your area.
Principal
Amount of money borrowed in a mortgage loan, excluding interest and other charges.
Sales Contract
The contract between the buyer and the seller. THe contract should explain, in detail, exactly what your purchase includes, who is responsible for providing it, what guarantees there are, when you can move in, what the "closing costs" are, and what "outs" parties have in case the contract is not fulfilled or if you cannot get a mortgage commitment at the agreed upon terms.
Settlement Expense
This is differnt from closing costs, but it also involves charges that a buyer or seller has to pay in closing a deal on a house. Settlement costs include insurance and tax payments, special assessments for improvements to municipal facilities and sales commissions.
Title
Evidence (usually in the form of a certificate or "deed") of a person's legal right to ownership of proprety.
VA - Veteran's Administration
A federal agency which in 1944 established a loan guarantee program to encourage private lending agencies to give liberal mortgages to honorably discharged veterans and their widows. Check your local Veteran's Administration office for more information.
Zoning
Classification of real property for varying uses. A municipality has a right to determine - and regulate - the use of property.