Summer home sales are in full swing. Whether you are considering buying or selling a home, a real estate transaction involves a major legal obligation. USLegal breaks down common terms used in real estate to help you better understand the law.

Most people borrow money in order to purchase their home. A loan for this purpose is commonly called a home loan or mortgage. The term mortgage originates from two Latin words. The first, “mort” is from the Latin word for death. The second, “gage” means pledge or promise. The word “mortgage” literally means “dead promise.” While this may seem nonsensical at first, it actually makes sense: the property was considered forfeited or “dead” to the borrower if the loan were not repaid. Similarly, once the loan was satisfied, the promise itself was dead or unenforceable.

Typically a mortgage is secured by a lien on the property. The mortgagor is the party transferring the interest in land. The mortgagee is the provider of the loan. A mortgage is paid in installments that include both interest and a payment on the principle amount borrowed. With respect to which entity has title to the property, a number of possibilities exist. Under the title theory, title to the security interest rests with the mortgagee. Most states follow the lien theory under which the legal title remains with the mortgagor unless there is foreclosure. The intermediate theory applies the lien theory until there is a default on the mortgage where upon the title theory applies.

Click here to Go Inside Buying and Selling and learn more about types of mortgages, deed of trust documents, escrow, types of lenders, defaults and foreclosures, and tax credits.

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Law and Legal Definitions

Deeds

What is a deed? A deed is a written document for the transfer of land or other real property from one person to another.

What is a warranty deed? – A deed that provides that the person granting the deed agrees to defend the title from claims of others. In general, the seller is representing that they fully own the property and will stand behind this promise. The warranty deed is the most common type of deed used to transfer property from one individual or business to another. Warranty deeds usually require that a title search be conducted by a trained professional to ensure that the property is free and clear of liens or encumbrances. Any lien or encumbrance discovered would effectively “cloud” the title of the property and make warranting the property risky or impossible.

What is a quitclaim deed? – A deed that transfers the owner’s interest to a buyer, but does not guarantee that there are no other claims against the property. Quitclaim deeds are also used when an heir or former spouse gives up all interests in a piece of real estate.

What is a deed of trust? – A legal document conveying property to a trustee often used to secure an obligation such as a mortgage or promissory note. A deed of trust typically specifies, among other things, the collateral for a loan, and gives a lender the right to seize and sell the collateral if the borrower fails to repay.

For more legal definitions, please visit our free online legal dictionary at http://www.uslegalforms.com/legaldefinitions/.