We’re continuing on with the next batch of Real Estate terms in our blog series, the ABCs of Real Estate! These blogs provide easy-to-understand definitions for some of the more common (but not always understood) words in Real Estate.
Without further ado, here are letters P through T:
P: Promissory note: A note signed by the borrower promising to repay a loan under specified terms that’s enforceable anywhere in the U.S.
Q: Qualifying ratios: Two ratios that are used to determine if a borrower can qualify for a mortgage. The “top” or “front” ratio is a calculation of the borrower’s monthly housing costs (including principle, taxes, insurance, and more) as a percentage of monthly income. The “back” or “bottom” ratio includes the housing costs plus the borrower’s other monthly debt obligations.
R: Recording: Registering a properly executed legal document (such as a deed or mortgage note) with the local county, thereby making it a part of public record.
S: Signing: Signing is often confused with closing, however they are not the same. Signing the documents typically takes place 72 hours prior to the loan funding, and the documents must be reviewed by the lender before they will wire funds to escrow for closing. Closing is when the deed is recorded and funds are dispersed.
T: Title insurance: An insurance policy that protects a new owner from any defects or liens against the title. Typically the buyer and the lender both acquire title insurance, with the seller paying for the buyer’s policy, and the borrower paying for the lender’s policy.