a/k/a Purchase Contract, Contract of Sale, Sale Contract, Purchase Agreement, etc.

A legally binding written agreement between a Seller and Purchaser of real property, which fixes all terms of the sale, including a description of the property, the condition and use of the property, the purchase price, the terms of payment, the status of title, permitted exceptions, date for closing and passing of title, etc.

a/k/a Installment Sale Contract

A contract for the purchase and sale of real property in which legal title does not pass to the Purchaser until installment payments for the purchase price, typically made monthly, are tendered in full, typically over a term of years. Until the purchase price is paid in full, legal title remains with the Seller, although the Purchaser has what is known as equitable title. Because the Purchaser has an equitable claim to the property, a defaulting Purchaser's interest may not be terminated by summary eviction proceedings, as is often mistakenly believed, but by a foreclosure proceeding analogous to a mortgage foreclosure.

The difference between the market value of real property and any liens or encumbrances against the property, such as mortgages, judgments, unpaid taxes, etc.

The evidence or proof of the right to own, possess, occupy, and enjoy real property.

The legal document by which title to real property is transferred from one person to another, recorded in the public records of the Clerk’s Office of the County in which the property is located. Once made a part of the Clerk’s permanent records, the recorded deed is returned to the new owner, but is no longer necessary to prove or transfer title(in contrast, for example, to an automobile title). Each time title to real property is transferred, a new deed must be drafted, executed by the transferor, and recorded.

A written negotiable instrument in which a borrower promises to repay a loan of money.

A loan in which in which the rate of interest may change, typically on a yearly basis, such that the borrower’’s monthly payment may fluctuate over the term of the loan.

A loan in which in which the rate of interest is fixed at closing such that the borrower’s monthly payment does not change over the term of the loan.

BRIDGE LOAN:

A loan given to enable a Purchaser to close on the purchase of a new home prior to the closing and sale of an existing home. These loans are usually payable in full within a short term - 3 or 4 months - with the proceeds of the sale of the existing home. Prior to payment in full, the borrower may be required to make monthly payments of interest only.

CONSTRUCTION LOAN:

A loan given to enable an owner of vacant land to build a house. As with a bridge loan, these loans are due within a short term and are paid with the proceeds of a long term amortized loan given by the same or a different lender when the house is competed.

AMORTIZED LOAN:

A long term loan (typically having a repayment term of between 15 and 30 years) wherein the borrower makes fixed periodic payments (usually monthly) of combined principal and interest until the debt is paid in full. This is the type of loan commonly associated with the purchase of real property.

BALLOON LOAN:

A loan payable with fixed periodic payments based on a long term amortization (e.g. 30 years), but which is due in payable in full within a shorter term (e.g. 5 years) with a large or "balloon" payment. This type of loan is used when the lender requires payment in full within the shorter term, but the borrower is unable to make the high monthly payments which would be required to amortize the loan over that short a period. It is contemplated that the borrower will either sell the house secured by the loan within the repayment period, or refinance the loan with another lender, in order to pay the debt.

A written instrument given by the purchaser or owner of real property ("Mortgagor") to a lender of money ("Mortgagee") pledging the property as collateral or security for the repayment of the debt. It is recorded in Clerk’’s Office of the County in which the property is located, and remains a lien against the property for so long as the debt remains unpaid. If the owner does not pay back the debt, the mortgagee may commence a foreclosure lawsuit in which the property may be sold to satisfy the debt.

A existing mortgage loan in the name of the Seller, repayment of which may be taken over or assumed by the Purchaser as all or part of the purchase price of the property. This saves the Purchaser the cost of many of the up-front fees and costs associated with a new mortgage loan, and is particularly advantageous when current interest rates exceed the rate on the assumed mortgage. Generally, only FHA and VA insured mortgage loans are assumable, and written approval from the lender for the assumption is required for loans made after December 15, 1989. When the Purchaser is approved for assumption, the Seller will be released from liability to pay the loan. Where approval is not required, the Seller will remain liable on the loan if the assuming Purchaser defaults for a minimum of 5 years.

A mortgage loan not insured or guaranteed by a government agency, typically having a repayment term of between 15 and 30 years, made for a maximum of 95% of the purchase price of the property. If made for anywhere between 80 and 95% of the purchase price, the borrower will be required to pay private mortgage insurance (PMI) to protect the lender against loss in the event of default.

A mortgage loan insured by the U.S. Government through the Federal Housing Administration. A Purchaser may borrow up to approximately 97% of the purchase price of the property, with limits on the maximum loan amount available according to locale.  If borrowing more than 80% of the purchase price, the borrower must pay an additional up-front mortgage insurance premium (MIP) of 1.5% of the loan amount, which may be added to the mortgage and paid over the 30 year term. In addition, the borrower must pay a yearly MIP of .5% of the loan amount for the term of the mortgage.  Click here for more details. 

VA MORTGAGE:

A mortgage loan insured by the U.S. Government through the Veterans Administration, available to veterans of the armed services, for 100% of the purchase price of the property, payable within 30 years. A funding fee of 1% of the mortgage amount must be paid at closing, and this amount may be added to the mortgage and paid over the 30 year term.   Click here for more details.

A mortgage loan up to 97% of the purchase price of residential property, insured by the State of New York Mortgage Agency, available to first time homebuyers whose incomes meet SONYMA guidelines, with limits on the maximum purchase price according to locale.  Closing cost assistance up to 5% of the mortgage loan amount is also available.

CLOSING COSTS, POINTS AND PREPAYABLES:

These are charged by mortgage lenders as part of the cost of obtaining mortgage financing.  It is not uncommon for Purchasers and Sellers to negotiate a contribution by the Seller to the Purchaser's costs as part of the Contract to Purchase.  Typical closing costs include the following:

Points: Also known as origination or discount fees, these are paid by the borrower in order to obtain a lower rate of interest, and, when paid in connection with the purchase of a home, are tax deductible.

MIP, PMI, and Funding Fees: See FHA mortgages, Conventional mortgages, and VA mortgages above.

Credit report and appraisal fee: The borrower must pay for a report showing an acceptable credit history and for a professional evaluation that the house is worth the purchase price.

Title charges: The borrower must pay for a title search at closing, lenders title insurance, and the lender’s attorney’s fee.

Recording and transfer charges: The borrower must pay at closing the cost of recording the deed and mortgage and the New York State Mortgage tax (.75% of the mortgage amount in Onondaga, Oswego and Cayuga Counties; .5% in Cortland, Madison, and Oneida Counties ).   The Seller must pay a transfer tax (.4% of the sale price).

Tax and insurance escrow: All FHA and VA loans and conventional loans of greater than 80% of the purchase price require that the lender pay all property taxes, and often homeowners insurance as well, affecting the property on behalf of the borrower/owner. In addition to paying 1/12 of the yearly amount of these charges as part of the monthly mortgage payment, the borrower must fund a reserve at closing for amounts to become due within the first year after closing.

At closing, prepaid or unpaid charges affecting the property such as property taxes, fuel oil, rents, etc., are prorated and adjusted between the Purchaser and Seller so that each pays their portion. For example, since property taxes are paid in advance in New York, the Seller may have paid the full year’s taxes for the fiscal year (January 1 - December 31, for County taxes; July 1- June 30, for School taxes; varying dates for City and Village taxes) and is therefore entitled to reimbursement at closing for that portion of the year for which the Purchaser will own the property.