Demystifying Real Estate Jargon: Part 2
Deed vs. Title
When you close on a home, one of the documents involved is the deed to the home. This deed is the paper that shows who holds legal title to the property. The term title refers to the concept of ownership. In other words, if I say you have "title" to a property, you show me that by producing your deed.
Mortgage Insurance vs. Homeowners Insurance
Unfortunately mortgage insurance is something that you will pay for that does not protect you directly. It is often required by the lender when you take out a loan with less than a 20 percent downpayment. It provides protection to the mortgage lender in the case that you can no longer make payments on your home, the lender must foreclose, and they do not recoup a portion of the money they originally loaned to you. Essentially, you are paying for this insurance because of the risk that your loan presents to the lender.
Homeowners Insurance is designed to protect you as the homeowner, similar to that of health insurance. So if you experience a bad storm and a tree falls on your home, or you were to have a fire, these events would be covered under your Homeowners Insurance. Once you own your home outright, it is your decision to carry Homeowners Insurance, but until then it is required as part of your home loan.
Real Estate Owned (REO) vs. Bank Owned
Surprisingly, these two terms are one in the same. You may come across these terms when searching for a home. REO properties are real estate owned by the lender, usually as a result of a foreclosure action.
Learn more commonly used real estate terms in our next issue of Demystifying Real Estate Jargon: Part 3! If you missed the first article in this series, check it out here Demystifying Real Estate Jargon: Part 1.
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