Buying a home is a huge undertaking. But unfortunately, too often potential buyers find themselves being bullied into signing mortgages that they really can’t afford because they don’t understand the language involved and are too nervous to ask for explanations before signing on the dotted line. It is important that you become as familiar as possible with the language of real estate law and lending practices before you purchase a home. Here are some of those key terms most frequently used:
The Buyer: The homeowner is both the buyer and the borrower in terms of real estate. The buyer is taking the money from his lender and using it to purchase his new home.
The Lender: Any entity who loans money in exchange for a greater return is considered a lender. When it comes to purchasing property, banks are a primary example of the lender because they provide the buyer with money that he must pay back over time with added interest.
The Secondary lender: If the loan given to the buyer by his lender (usually the bank) is not enough to cover the cost of his home, then he will need to borrow money from another entity. This second unit is then considered to be the secondary lender. Just like the primary lender, it has loaned the buyer money with the expectation that he will repay the amount with interest.
Counter Claim: When entering foreclosure, the buyer is essentially being sued by the lender for the amount that he owes. The homeowner can then, in turn, make a counter claim and sue the lender for illegal actions that took place in the borrowing or repayment process.
Foreclosure: An attachment on the buyer’s mortgage allows the lender to repossess the buyer’s home if the homeowner fails to make interest and/or principal payments on his mortgage.
Lien: A note or promissory that gives a creditor the right to secure the payment of an owed debt by the sale of the homeowner’s property. If the homeowner has multiple lenders, then he will have multiple liens on his home.
Mortgage: This is the contract between the borrower and the lender that serves as an obligation for the repayment of a debt. Often, you will hear people talk about their mortgage payments. Essentially, this is the amount that people owe the bank each month as a part of the repayment plan for the loan used to pay for their homes.
Mortgage Arrearage: When the homeowner falls behind on his payments and is unable to repay his debt to the lender, that past due amount becomes the arrearage.
If you are still unsure about all of the legal responsibilities associated with purchasing a home, then it can be helpful to contact a lawyer in your area. Or, if you have already purchased a home but find that you are struggling to make your monthly payments, then it is also in your best interest to consult an attorney before you fall too far into debt. A qualified attorney will be able to review your mortgage and loan to assess if any illegal actions took place, and then provide you with your best options for moving forward.