When it comes to real estate closing, it’s not always the most easily understandable process. That’s because it’s a discrete legal area where everything has to be done exactly according to regulation, so understandably the language can be a little confusing. For new home buyers and even folks who have been through the process before, it can be hard to navigate all of that tricky jargon.
Our team of closers at Liberty Title understands it’s important for you to know exactly what’s happening during the closing process. That’s why we’ve put together this list of some of the top terms you need to understand before you ever sit down at the closing table.
An abstract is a chain of ownership for a property. It’s essentially a summary of all of the public records relating to the sale and purchase of a property. It should include information about deeds, probate records, legal proceedings, mortgage records, wills, and anything else that would affect the sale of the home.
The principal is the amount of debt that’s owed to the lender before interest. If you borrow $180,000 for a loan, that amount is your principal owed. However, as a buyer, you will pay interest on this amount every month. Thus, your amount owed would become your principal plus interest.
3. Title Search or Exam
A title search is a search of all the public records related to a home. A title company is responsible for conducting the search of these records. Following the search, the records will be examined to determine if there are problems with the title that need to be cleared up before closing where the sale will be finalized.
4. Prepaid Interest
From the date of the property closing up until the first day of the following month, that loan interest will be paid at closing. Both the principal and interest of the previous month will be paid on the first day of the next month. Mortgage interest is paid in arrears. For example, your February mortgage payment pays for January’s interest.
5. Title Insurance
Title insurance is available to both lenders and buyers. Title insurance protects you in case of an undiscovered problem with the title that could end up with court costs or other related problems. All buyers are required to pay for lender’s title insurance, which insures the lender’s interest in the property only. Buyers may choose to pay for owners title insurance to ensure their own interest in the property. Title insurance calculates into closing costs, and the insurance premium varies depending on the purchase price and loan amount on the property.
Twin Cities Real Estate Title Company
If you’re still having trouble sorting through everything you need to know for the closing process, don’t worry. The experienced and professional title closers at Liberty Titledo everything they can to make the process as simple as possible.
When you come into our office, you’ll be warmly greeted with a cup of coffee and cookies because we want you to feel comfortable and at ease. Connect with our team of title closers at 763.494.0340, or contact us to discuss how we can help make your closing process smooth.