Mortgage Terminology

Occupancy Date

This provision is a good way to help ensure that your home will be ready for occupancy after the closing takes place. As part of your formal purchase offer, consider including a provision that holds the seller responsible for paying you rent should they not move out on or prior to the agreed-upon date. This allows you, for example, to use the money you receive to pay your own rent if you are leasing your current residence.

Occurrence

An accident, including continuous or repeated exposure, which results in bodily injury or property damage neither expected or intended by the insured. Occurrence policies cover claims which occur during the policy period regardless of when the claim is made against the policy. Also see CLAIMS MADE.

Offer

When you make an offer on a house, it means you are making a formal bid to buy a home. You can work with your real estate sales professional to put together a written bid that abides by the laws in your state. Your offer should include such aspects as the address of the home, the sales price, the type of mortgage financing you will use to purchase the home, any personal property that might be included as part of the sale, and a target date for closing and occupancy. An earnest money deposit typically accompanies the offer. Your real estate sales professional can provide guidance on other elements of the offer. Once you have made an offer, the seller has the opportunity to accept, decline, or make a counter-offer. If your offer is accepted, you have a ratified sales contract. This contract is the starting point for working with an approved lender to get the mortgage that's right for you.

Off-site Improvements

Improvements outside the boundaries of a property that enhance its value, such as sidewalks, streets, curbs, and gutters.

Ongoing Costs

Home buyers should not forget that there are on-going costs associated with owning a home. They include, but are not limited to:

Monthly mortgage payment;
Mortgage insurance;
Homeowner's insurance;
Property taxes; and,
Utilities, such as gas, oil, water and electricity.

Another cost home buyers should consider is how much it will cost to maintain their home. These costs include everything from cleaning and minor repairs to yard work and painting. Condominium owners and people living in planned unit developments should factor in any homeowners' association fees or similar costs.

Open-end Mortgage

A mortgage allowing the borrower to receive advances of principal from the lender during the life of the loan. See also: closed-end mortgage.

Open Listing

A written contract that does not allow one licensed real estate agent the exclusive right to sell a property for a specified time, but reserving the owner's right to sell the property alone without the payment of a commission.

Original Principal Balance

The total amount of principal owed on a mortgage before any payments are made.

Origination Fee

A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount. The loan origination fee covers the administrative costs of processing the loan. It is often expressed in points. One point is 1 percent of the mortgage amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000.

Other Buyer Costs

There are other costs associated with the closing that are typically paid by the buyer. They often include:

Fees paid to the lender: Loan discount points, loan origination fee, credit report fee, appraisal fee, and assumption fee.
Advance payments or prepaid fees: Interest, mortgage insurance premium, and hazard insurance premium.
Escrow accounts or reserves: State and local law and lenders' policies vary but these reserves may have to be set up if the lender will be paying property taxes, mortgage insurance, and hazard insurance.
Title charges: Closing (or settlement) fee, title insurance premium, title search, document preparation fees, and attorney fees. The fees the buyer pays for a real estate attorney are not part of settlement procedures.
Recording and transfer fees: States often impose a tax on the transfer of property. The payment of a fee for recording the purchasing documents may be required.
Additional charges: Surveyor's fees, termite and other pet infestation inspection fees, and the cost of other inspections required by the lender.
Adjustments: Items paid by the seller in advance and items yet to be paid for which the seller is responsible. The most common expense is property taxes, but others may have to be addressed.

Other Contingencies

A contingency in a contract states that if a certain requirement is not met, the deal can be canceled. Some of the most common contingencies related to home purchases include:
Professional home inspection: This states that your sales contract is contingent on a satisfactory report by a professional home inspector. You have the right not to proceed with the purchase of the home, or to re-negotiate the terms of purchase, if any major problems are uncovered.
Termite inspection: This states that the property is free of both visible termite infestation and termite damage.
Asbestos: You may choose to hire a qualified professional to inspect the home, take samples for asbestos, and offer solutions to correct any problems.
Formaldehyde: This colorless, gas chemical was used in foam insulation for homes until the early 1980s and is emitted by some construction materials. It is suspected of causing cancer, and it can also irritate the throat, nose, and eyes. A qualified inspector can let you know if the gas is present in the home you wish to purchase.
Radon: Most home buyers require that the house be tested for radon, a naturally occurring, odorless gas that can cause health problems.
Hazardous waste sites: The Environmental Protection Agency has identified contaminated hazardous waste sites across the country. You can contact your EPA regional office for more information.
Lead-based paint: You should also have the house inspected for lead-based paint, which can lead to very serious health problems. If the house was built before 1950, you can be fairly certain lead-based paint was used. For houses built between 1950 and 1978, there is also a chance lead-based paint was used. Lead disclosure regulations can vary from state to state. Health officials in the state where the home you want to buy is located may be able to provide further guidance.
The seller or real estate professional must give you a pamphlet that explains lead hazards and tell you about any lead-based paint of which the seller is aware before a sales contract on a home built before 1978 can be finalized. The seller must also allow 10 days during which you can hire a professional to conduct an inspection for lead-based paint hazards.

Over-improvement

Renovation or remodeling inappropriate to a site due to its excess size or cost, or inadequate return.

Owner Financing

A property purchase transaction in which the property seller provides all or part of the financing.

Owner Occupied Purchase

The purchase of a property for the purpose of the primary residence of the owner.