Demystifying Real Estate Jargon: Part 3
Chain of Title vs. Clear Title on Your Home
Chain of title can be a confusing term. It refers to the history of the actual title and how many times it has transferred ownership. It’s essentially a timeline document listing all owners of a property - beginning with the government, builder or original owner through the current individual holding the title for that property.
However, a clear title means that there are no liens or conflicting claims of ownership associated with the title. A title search must be completed in order to make sure that the title is clear. Typically the title company will complete this search for you and you pay for this research by a fee or line item as part of the closing which will appear on your settlement statement. While anyone has access to this search, we suggest letting a professional perform the search as it is imperative to make sure that the title is clear. A title with issues that have been missed can cause you a major headache, a dispute as to the property’s true ownership and most likely a financial hit.
Closing vs. Settlement/Closing Statement
It’s time to clear up any confusion on these terms as they are frequently used when buying a home. A closing is when you meet with your closing company or attorney and complete your home purchase transaction. Every state has its own protocol for how closings are conducted so ask your agent to explain the normal procedure to you. Depending on your state’s practices, you may receive your keys to your new home that same day and be able to take possession of your new home and move in.
A settlement/closing statement is a final document gathered by the closing agent itemizing all financial settlements of the home transaction for each party involved. This document is also known as a settlement sheet and will show a breakdown of all fees by line item. These closing costs or settlement fees are agreed upon during your contract and are typically the norm. The fees can including mortgage insurance, commissions, charges and credits, etc. See our article on closing costs for more details.
Mortgage Payment vs. PITI
While you may hear these two terms used in different contexts, they actually refer to the same thing. PITI is the abbreviation for the components that make up a mortgage payment. “P” stands for principal, the amount of money you actually borrow in the form of a mortgage. “I” represents interest, the money your lender charges you for the privilege of borrowing all of that principal. “T” refers to the taxes that you will pay on your home based upon the property’s assessed value. The last “I” stands for your homeowners insurance that will be bought when you apply for a loan to guard against potential damages to your future home. For more info check out our article What exactly is a mortgage payment?
Understanding these three very different aspects of buying a home will keep your home buying journey on track and eliminate surprises. If you have any questions that Nestiny can’t answer for you, it’s a good idea to meet your chosen agent for coffee and let them share more specifics with you. This will improve your chances of success and keep you on track.
Want more homebuying advice? Nestiny is a great place for homebuyer education and to help you gauge how ready you are to buy a home. Journey Homeward allows you to enter all of your wants and needs while the True Affordability Tool will break down your budget, showing what you can comfortably afford. You will also receive a free Ready Report that is personalized based upon the information that you entered. This report will give you a vital head start in the home buying journey, saving you valuable time and money.