Demystifying Real Estate Jargon: Part 2
Deed vs. Title
When you close on a home, one of the documents you will sign is the deed to the home. This deed essentially authorizes you to claim ownership of the property. To be very clear, a title simply gives you the right to use the property as your own until the time you pay off your mortgage loan.
The title to your home proves outright ownership and is held by your lender until the time that you have paid off your mortgage in full. This is a legal document that transfers ownership from one person to another. If you pay off your home mortgage before reselling the home your lender will sign this title over to you, proving that you own the house in full.
Special note: Texas homeowners actually use mortgages for their transactions so please discuss with your real estate agent when considering buying a home for the special nuances.
Mortgage Insurance vs. Homeowners Insurance
Unfortunately mortgage insurance is something that you will pay for that does not protect you directly. This can sound really confusing. Instead, it provides protection to the mortgage lender in the case that you can no longer make payments on your home. You are basically paying for this insurance because of the risk that you present 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. They refer to when a mortgage lender or bank repossess a home during the process of foreclosure.
Stay tuned for more explanations of commonly used real estate terms in our next issue of Demystifying Real Estate Jargon: Part 3!
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