In a recent episode of the Emmy award winning television show, Cash Cab, several people with stumped by the acronym, FSBO. This is a term often used in the real estate world to describe a person selling their home by owner (For Sale By Owner). As a REALTOR® I was a bit surprised but then I started to remember of all the times a glazed look came over a buyer’s eyes when I talked about escrow or earnest money. These can easily be confused with other real estate and mortgage terms like down payment or cash to close. It is totally understandable because homebuyers do not buy houses everyday.
There are so many terms that could possibly confuse a First Time Homebuyer that I thought a glossary of real estate terms might be helpful. So over the next few weeks I am going to have a series of posts for the first time homebuyer with explanations of the most often used (and sometimes confusing) real estate terms. This way you can skip buying that big “how to buy a house” book or attending that First Time Homebuyer Class and have a quick resource at your fingertips. Today’s Real Estate Term is:
Title Insurance A policy of insurance to protect against losses arising from defects or problems with the title to the property. The premium (fee) is paid at the closing and is a one time charge. Title problems can range from an encroachment of a neighbor’s fence on the wrong side of a property line to an old mortgage that was not paid prior to the sale of the home.
On any home purchase there can be two different types of title insurance; one protecting the lender and one protecting the homeowner. If a homebuyer is taking out a mortgage to purchase the property, the lender will require the home buyer to purchase mortgage insurance to protect the lender’s equity in the property. A home buyer will be asked if they would like to purchase optional coverage to cover their own equity in their new home.
Some first time homebuyers mistakenly think that optional translates to unnecessary. This couldn’t be further from the truth. A homebuyer cannot be forced to purchase an owner's policy. But consider this, if the lender stipulates that you must buy to protect their interests, why wouldn’t you want to protect your own?
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