Homebuying is complicated, like really complicated. The vocabulary itself is enough to make you want to scream. Though, here at HOME, Inc. we try to simplify it for you and provide simple terms and definitions that you can understand. And if you are still looking for support, we’ve got some homeowner experts just a call away.

As we continue our homebuyer alphabet, we stop on the letter D to understand some more terms:

  • Deed: This is a document that shows that the owner of a piece of real property has title to that property. Once a deed is filed and recorded by your local government, the deed becomes a public record. (It’s the proof that you own your house, like a receipt)
  • Deed of Trust: A deed of trust is a document showing that a borrower conveys title to real property to a third party (trustee) to be held as security for a lender, with the provision that the trustee will return the title once the debt is paid. The trustee will sell the property and pay the debt if the borrower defaults. In other words, when you buy a house, a trustee will hold your Deed of Trust for your lender until you pay off your mortgage or default on the loan. (the lender and borrower give the title of the property to a neutral third party)
  • Department of Housing and Urban Development (HUD): HUD is a governmental entity responsible for the implementation and administration of housing and urban development programs. (the group with big ideas and big budgets)
  • Default: Default is the failure to make payments on a timely basis or in accordance with the terms of your promissory note. Default may also result from failure to submit requests for deferment or cancellation on time. The consequences of default are severe. (not to make a payment/do a task on time)
  • Delinquency: This is the failure of a borrower to make timely payments under a loan agreement. (when you don’t make a payment)
  • Discount Point: A discount point is an amount of money a borrower pays to a lender, or the seller pays to a lender, to increase the lender’s effective yield. One point is equal to one percent of the loan. What a discount point effectively does is pay the lender upfront in exchange for a reduced interest rate. (prepaid or reduced interest)
  • Down Payment: A down payment is a portion of the sales price you pay to the seller to close a sale, with the understanding that the balance will be paid at settlement. It is also the difference between the sale price of real estate and the mortgage amount. (part of the sale you pay at closing)
  • Due-on-Sale: Due-on-sale is a clause in a mortgage contract that states that if the mortgagor sells, transfers, or in any other way encumbers the property, then the mortgagee has the right to implement an acceleration clause making the balance of the mortgage due. In other words, if you sell your home, you have to pay off the mortgage immediately, and then any money that’s leftover you can use any way you choose. (lender can be repaid when the property is sold)