Closing Terms

Adjustable-Rate Loans – Also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payment may be lowered.

Annual Percentage Rate (APR) – The cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay. This number will almost always be higher than your note interest rate.

Closing Costs – (Transaction Costs or Settlement Costs) may include application fees, title examination, abstract of title, lenders and owners title insurance, and property survey fees; fees for preparing deeds, mortgage and settlement documents; attorneys’ fees; recording fees, credit report fees, appraisal fees,… Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within 3 days of application from the lender. The good faith estimate lists each expected cost as an amount or a range.

Contract – A legally binding agreement of two or more parties or entities, which creates or modifies a legal relationship. Generally based upon offer and acceptance.

Contingency – This creates the right to terminate the sales contract, with no penalty and with full refund of earnest money, upon the happening or non-happening of a specified event. They can include, loan approval, inspection, appraisal, or anything that would change the advantages of buying the property.

Conventional Loans – Mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly known as Farmers Home Administration, or FmHA).

Earnest Money – A sum of money paid by a buyer at the time of entering a contract to indicate their intention and ability to follow through with agreement made in the contract. These funds are credited on the settlement statement towards the purchase price.

Escrow (Impounds) – Funds collected at closing and held by the lender for payment of taxes and insurance (and possibly private mortgage insurance). The lender will collect the amount based on the month you close in relation to the month the tax or insurance is due. It is their assurance that these items are paid in a timely manner on properties they have secured mortgages to. Escrow also refers to the holding of money or documents by a neutral third party prior to closing.

Fixed-rate loans – These loans generally have repayment terms of 15, 20 or 30 years. Both the interest rate and the monthly payments (principal and interest) stay the same during the life of the loan.

Good Funds – A settlement agent shall not disburse settlement proceeds unless such proceeds are collected at the time of closing…Good funds can consist of a certified check, cashier’s check, treasurer’s check or wire transfers.

Homeowners Association – Association requiring Mandatory or voluntary membership in planned community. The HOA has enforcements rights of the protective covenants and manages the recreation areas and amenities and other common property and usually collects dues from members. All owners who purchase property within the community are governed by the HOA and its protective covenants. It is suggested that when purchasing a property, a buyer familiarizes itself with the community regulations on your use of the property.

Homestead Exemption – An exemption on county taxes that is applicable is the property owner occupies the property as of January 1 of the following calendar year. This exemption must only be filed once during the time period the owners occupies the property.

Closing Disclosure – A statement prepared by an escrow agent or lender, giving a complete breakdown of costs involved in a real estate transaction.

Intangible Tax – This tax is collected on behalf of the (state of Georgia??? Or county) and is $1.50 per $500 based on the loan amount. (Loan amount $150,000 = Intangible Tax $450)

The interest rate – This is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market amount.

Joint Tenancy with Rights of Survivorship – This deed conveys title to two or more people and by reference to the Georgia statute provides that, upon the death of the first joint tenant, title to that person’s interest passes immediately and automatically to the surviving joint tenant. This process does not require any court action. The surviving joint tenant will be required to provide proof of death when he or she conveys or encumbers the property.

Loan Origination Fees – These are fees charged by the lender for processing the loan and are often expressed as a percentage of the amount.

Lock-in – Refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be charged at closing.

Points – Fees paid to the lender for the loan. One point equals 1% of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.

Power of Attorney (POA) – A document that gives another person legal authority to act on your behalf. For the purposes of a real estate transaction with our firm, the POA must be specific and reference the legal description of the property intended for the act of sale.

Prepaid Interest – The interest paid for the time period between the loan closing date and the end of the month.

Private Mortgage Insurance (PMI) – Protects the lender against a loss if a borrower defaults on the loan and the foreclosure sale prices is less than the amount owed. It is usually required for loans in which the borrower is financing more than 80% of the sales price for a purchase and 80% of the appraised value for a refinance.

Promissory Note – This document is your promise to repay the debt and creates the obligation for the loan debt. It also provides information about your loan (term of loan, payments, interest rate, prepayment penalties, etc).

A Proration – This is the adjustment of property taxes, interest, homeowners association dues, etc. between the buyer and seller according to the date of closing.

Quitclaim Deed – A deed that transfers whatever ownership interest the transferor has in a particular property, however, the deed does not guarantee anything about what is being transferred.

A Security Deed (Mortgage, Deed to Secure Debt) – This deed is a legal document binding property to the lender as “security” or collateral for repayment of the loan. It gives the lender a right to take possession of the property if the borrower fails to pay off the loan. This document is recorded at the county courthouse and transfers to the lender legal title to the subject property until the loan is satisfied.

Subordination Agreement – An agreement by which one holding an otherwise senior lien or other real estate interest consents to a reduction in priority vis-à-vis another person holding an interest in the same real estate.

Survey – The process by which a parcel of land is accurately measured to establish the existing boundary lines, any setback lines, power, utility or other easements and their specific location especially any encroachments or issues such as an overlapping driveway, retaining wall, gutter or other potential problems. It also shows the size of the property and location of any improvements thereon.

Tenancy in Common – This deed conveys title with no mention as to what would happen if one of the title holders were to die. The result is that if a title holder dies, his or her interest passes directly to his or her estate. At that point, the surviving title holder could not convey or borrower money against the interest of the deceased holder without first acquiring title from the estate. This could involve probating the will of the deceased or, if there is no will, filing for administration of the estate and dealing with Georgia laws of descent.

Termite Inspection – An inspection, done within 30 days of the closing date, that shows the existence or non-existence of active or previous infestation of subterranean termites and other wood-destroying organisms. It is done on a uniform state form.

Termite Bond – This bond is an insurance contract with a termite treatment company which states that if infestation of termites, or other wood-destroying organisms listed on the bond, occurs during the term of the bond, that the company will treat such infestation without cost to the owners. All bonds are different and should be review and considered on their individual terms.

Title Insurance – Owners – Insurance issued by a title company that protects a new property owner against previous claims on title.

Title Insurance – Lenders – Insurance issued by a title company that protects a lender against claims on title.

Title Search (Title Exam) – An examination of the records of the registry of deeds or other office which contains records of title documents to determine whether title to the property is good, whether there are defects in the title.

Transfer Tax – A tax upon the passing of the title to the property of $1 per $1000 based on the purchase price.

Truth-In-Lending Disclosure (TIL) – Required by federal law and discloses all lender required costs for the loan, the annual percentage rate, whether there is a prepayment penalty, etc. It also requires lenders to disclose the terms of a loan, including the total amount of the loan, the annual interest rate and the number, amount and due dates of all payments necessary to repay the loan. You will receive a final disclosure at your closing.

Waiver of Borrowers Rights – A document that puts the borrower on notice that in the event of foreclosure there is not a court hearing in the State of Georgia and the borrower waives their rights to a court procedure if there is a default on the loan.

Warranty Deed – A document that is used to transfer title from the seller to the purchaser and is recorded at the county courthouse. In addition, it expresses assurance about the legal validity of the title being transferred.