Glossary
A
- Abstract (of Title)
- A historical summary of all the recorded transactions that
affect the title to the property. An attorney or a title company
will review an abstract of title to determine if there are any
problems affecting the title to the property. All such problems
must be cleared before the buyer can be issued a clear and
insurable title.
- Abutting
- Bordering upon or next to; the joining or touching of
adjoining land; sharing a common boundary.
- Acceleration Clause
- A loan provision giving the lender the power to declare all
sums owing lender immediately due and payable upon the violation
of a specific loan provision, such as the sale of the property, or
the failure to make loan payments on time. Example : John sells
his property to Mary who takes over John's mortgage payments. They
do not notify the lender of this transaction. The lender finds out
that the title to the property has transferred and calls the loan,
since the loan documents state that the loan is due on the sale of
the property. John is now liable to pay his lender in full.
- Acceptance
- An offeree’s consent to enter into a contract and be bound by
the terms of the offer. In a real estate transaction an offer is
made from the buyer to the seller. If the seller accepts the offer
within the prescribed time limit, it becomes a binding contract.
In this case Acceptance is documented by the Seller signing and
delivering the signed document.
- Accretion
- The addition to land through natural forces like wind or
water.
- Example: Soil carried by a river then deposited on land.
- Acknowledgment
- Formal declaration before a public official (typically a
Notary Public) that one has signed a document. Required before
recording real estate legal documents, such as a deeds of trust.
- Acre
- A measure of land equal to 43,560 square feet.
- Additional Principal Payment
- A payment by a borrower of more than the scheduled principal
amount due in order to reduce the remaining balance on the loan.
- Adjustable Rate Mortgage (ARM)
- Also known as a variable rate mortgage. The interest rate on
these mortgages changes periodically.
- Adjusted Basis
- The adjusted basis figure is the value used to determine
capital gains when you sell real property. The original cost of a
property plus the value of any capital expenditures for
improvements to the property minus any depreciation taken.
- Adjustment Period
- The length of time for which the interest rate is fixed on an
adjustable. If the adjustment period is six months, then the
interest rate will remain fixed for six months, after which time
it will adjust.
- Affordability Analysis
- A detailed analysis to determine whether you can afford the
purchase of a home. An affordability analysis takes into
consideration your income, liabilities, and available funds, along
with the type of mortgage you plan to use, the area where you want
to purchase a home, and the closing costs that you might expect to
pay.
- Agreement of Sale
- A written signed agreement between the seller and the
purchaser in which the purchaser agrees to buy certain real estate
and the seller agrees to sell upon terms of the agreement. Also
known as contract of purchase, purchase agreement, offer and
acceptance, earnest money contract or sales agreement.
- Amenity
- A feature of real property that enhances its attractiveness
and increases the occupant’s or user’s satisfaction, although the
feature is not essential to the property’s use. Natural amenities
include a pleasant or desirable location near water, scenic views
of the surrounding area, etc. Human-made amenities include
swimming pools, tennis courts, community buildings, and other
recreational facilities.
- Amortization
- A gradual paying off of a debt by periodic installments which
pay principal and interest.
- Annual Percentage Rate (APR)
- The effective rate of interest for a loan per year. This rate
is typically higher than the note rate because it takes into
account closing costs. This is one way to compare loan programs
offered by different lenders. Caution : the APR is sometimes
computed differently by different lenders and can be misleading.
- Application
- A form used to apply for a mortgage loan and to record
pertinent information concerning a prospective mortgagor and the
proposed security.
- Appraisal
- An opinion or estimate of the value of a property at a given
date.
- Appreciation
- An increase in the value of a property due to changes in
market conditions or for other reasons, such as additions and
renovations. Opposite of depreciation.
- Arm's length transaction
- A transaction among parties each of who acts in his or her own
best interest.
- Example: A transaction between a father and his son would NOT
be an Arm's length transaction.
- Assessed Value
- The valuation placed on property by a public tax assessor for
purposes of taxation.
- Assessment
- The process of placing a value on property for the strict
purpose of taxation. May also refer to a levy against property for
a special purpose, such as a street or traffic light or sewer
assessment.
- Assessment Rolls
- The public record of taxable property.
- Assessor
- A public official who establishes the value of a property for
taxation purposes.
- Assignment
- The transfer of a mortgage from one person to another.
- Asset
- Anything with a dollar value that you own. Banks consider your
assets when determining how much you can borrow.
- Assumable Mortgage
- A mortgage loan which allows a new home buyer to take over the
obligation of making loan payments with no change in the terms of
the loan. Assumable loans do not have a due-on-sale clause. The
lender has to be notified and agree to the assumption. The lender
may require the buyer to qualify for the loan and may charge an
assumption fee. The seller should obtain a written release from
the lender stating clearly that he/she is no longer liable to make
mortgage payments. See also "Subject To."
- Attorney In Fact
- One who is authorized to act for another under a power of
attorney which may be general or limited in scope.
- Example: John wants to sell his house but has to be out of the
country for four months. John gives authorization to Mary to sign
the grant deed to sell the property to a buyer. Mary becomes
John's Attorney In Fact.
[Back to
the top of this page]
B
- Back-end ratio, or debt ratio
- The amount you pay in monthly debt (car payments, credit
cards, student loans, etc.) divided by your gross monthly income.
- Balloon (Payment) Mortgage
- Usually a short-term fixed-rate loan which involves small
payments for a certain period of time and one large payment for
the remaining amount of the principal at a time specified in the
contract.
Example : A balloon mortgage for $25,000 has
interest only payments for 5 years at 12 percent ($250 per month),
with the full principal of $25,000 due and payable after five
years
- Bankruptcy
- The financial inability to pay one's debts when due. The
debtor surrenders his assets to the bankruptcy court. An
individual typically files for Chapter 7 (all debts wiped out) or
Chapter 13 (establishes a payment plan to pay off debts). A
bankruptcy stays on an individual's credit report for seven years.
- Beneficiary
- The person who receives or is to receive the benefits
resulting from certain acts.
- Example : The lender is named as the beneficiary on a mortgage
loan.
- Example : John has a life insurance policy for $100,000 with
Jane as his beneficiary. Should John die, Jane will receive the
benefits in the amount of $100,000.
- Betterment
- An improvement that increases property value as distinguished
from repairs or replacements that simply maintain value.
- Bill of Sale
- A written document that transfers title to personal property.
- Binder
- 1. A title insurance binder is the written commitment of a
title insurance company to insure title to the property subject to
the conditions and exclusions shown on the binder.
- 2. Preliminary agreement, normally secured with earnest money,
between a buyer and a seller as an offer to purchase real estate.
- Biweekly Mortgage
- A mortgage which requires half the normal monthly payment
every two weeks. Over the course of the year, twenty-six half
payments are made which is equivalent to thirteen full mortgage
payments. As a result of this extra payment the loan amortizes
much faster than a loan with normal monthly payments
- Blanket Insurance Policy
- A single policy that covers more than one piece of property
(or more than one person).
- Blanket Mortgage
- A mortgage covering more than one piece of property.
- Example : A developer subdivides a tract of land into lots and
obtains a blanket mortgage on the whole tract.
- Bond
- 1. A debt instrument in the capital markets. The U.S.
government, corporations and municipalities use bonds to raise
money. Bonds can also be backed by mortgages. The best known bond
is the 30-yr. treasury bond issued by the U.S. government.
- 2. A sum of money given to a court to guarantee against a
loss. For example if there is a lien on a property, the owner may
remove the lien by posting a bond.
- Borrower (mortgagor, trustor)
- One who applies for a loan secured by real estate and is
responsible for repaying the loan (mortgage).
- Breach
- To break or violate an agreement.
- Bridge Loan
- An interim loan typically used when the buyer is unable to
sell his/her house but needs money to close the transaction on the
house he/she is buying. The bridge loan is made on the buyer's
current residence to finance the buyer's new residence. The loan
is paid off when the buyer's current residence is sold.
- Broker
- See Real Estate Broker or Mortgage Broker.
- Browser
- Short for Web browser, a software application used to locate
and display Web pages. The two most popular browsers are Microsoft
Internet Explorer and Netscape Navigator.
- Building Code
- Local regulations that control design, construction, and
materials used in construction. Building codes are based on safety
and health standards.
- Building Line or Setback
- Distances from the ends and/or sides of the lot beyond which
construction may not extend. The building line may be established
by a filed plat of subdivision, by restrictive covenants in deeds
or leases, by building codes, or by zoning ordinances.
- Buydown
- Obtaining a lower interest rate (buying down the rate) by
paying additional points to the lender. The lower rate may apply
for the full duration of the loan or for just the first few years.
A buydown may be used to qualify a borrower who would otherwise
not qualify since a buydown results in lower payments.
- Example : A very popular buydown is the 2-1 buydown. If the
interest rate on the note is 9 percent, the buydown results in the
rate being 7 percent (9 percent minus 2 percent) for the first
year, 8 percent (9 percent minus 1 percent) for the second year,
and 9 percent thereafter.
- Buyer's Broker
- An agent hired by a buyer to locate a property for purchase.
The broker represents the buyer and negotiates with the seller's
broker for the best possible deal for the buyer.
- Buyer's Market
- Market conditions that favor the buyer. I.e., a market in
which there are more sellers than buyers. As a result, a buyer has
an excess supply of homes from which to choose and can negotiate a
lower price. A buyer's market may be caused by an economic slump
or overbuilding.
- Buying Your Home: Settlement Costs and Information (HUD guide)
- A booklet that provides an overview of the lending process and
is required to be given to consumers after the loan application is
completed.
- Bylaws
- A set of regulations by which an organization conducts its
business.
- Example : A condominium association prepares bylaws that state
the minimum number of owners to conduct a meeting to decide
policies.
[Back to
the top of this page]
C
- Call Option
- A clause in the mortgage that gives the lender the right to
"call" the mortgage due and payable at the end of a given length
of time, for whatever reason.
- Capital Expenditure
- The cost of an improvement made either to extend the life of a
property or to increase its value.
- Capital Gains
- When you sell a capital asset at a profit, such as real
estate, the difference between the amount you sell it for and your
basis, which is usually what you paid for it, is a capital gain.
- Capital Improvement
- Any item, structure or addition that is a permanent
improvement to the property.
- Caps (interest)
- Limits on the amount that the interest rate on an ARM can
change per year and/or during the life of the loan. Payment caps
limit the amount that monthly payments for an ARM may change.
- Cash Flow
- The amount of cash derived over a certain period of time from
an income-producing property. The cash flow should be large enough
to pay the expenses of the income producing property (mortgage
payment, maintenance, utilities, etc.).
- Caveat Emptor
- A legal term meaning "let the buyer beware." The buyer must
examine the property and buy at his/her own risk.
Example : A
property may be offered in an "as is" condition with no expressed
or implied guarantee of quality or condition.
- CC&R's - Covenants, conditions, and restrictions.
- The basic rules establishing the rights and obligations of
owners of real property within a condominium, townhouse, PUD,
subdivision or other tract of land. An association is organized
for the purpose of operating and maintaining property commonly
owned by the individual owners. The association is normally made
up of property owners.
- Certificate of Deposit
- A certificate from a bank stating that the named party has a
specified sum on deposit, usually for a given period of time at a
fixed rate of interest.
- Certificate of Eligibility
- The document issued by the Department of Veterans Affairs to
those who qualify for a VA loan which may be used to buy a house
with zero down. Certificates of eligibility may be obtained by
sending the form DD-214 to the local VA office along with VA form
1880.
- Certificate of Occupancy
- Document issued by a local governmental agency that states a
property meets the local building standards for occupancy and is
in compliance with public health and building codes. This document
is normally required by a lender prior to closing the loan.
- Certificate of Reasonable Value (CRV)
- An appraisal performed by a VA approved appraiser which
establishes the property's current market value. This value
establishes the ceiling on the maximum VA mortgage loan principal.
- Certificate of Title
- An opinion rendered by an attorney as to the status of title
to a property, according to the public records. This certificate
does not the same level of protection as title insurance.
- Certificate of Veteran Status
- The document given to veterans or reservists who have served
90 days of continuous active duty (including training time). This
document enables veterans to obtain lower down payments on certain
FHA-insured loans.
- Chain of Title
- The chronological order of conveyance of a parcel of land from
the original owner to the present owner.
- Example: An abstractor can research title to property going
back to the date that the property was granted to the United
States.
- Chattel
- Personal property.
- Clear Title
- A marketable title, free of clouds and disputed interests.
Most lenders require a clear title prior to closing.
- Closing
- The final meeting between the buyer, seller and lender (or
their agents) at which the property and funds legally change
hands.
- Closing Costs
- Expenses incurred by the buyer and seller in a real estate or
mortgage transaction. There are two types of costs: recurring and
non-recurring.
- Non-recurring costs are one time transactional costs which
include
- Discount and origination points
- Lender fees: underwriting, processing, document
preparations, flood certificate, tax service, wire transfer,
courier, etc
- Title insurance fees
- Escrow, attorney or closing agent fees
- Recording fees
- Inspection and appraisal fees
- Real estate brokerage commissions
- Recurring fees are costs associated with owning the property
and they recur month after month. These costs may include hazard
insurance, interest, property taxes, mortgage insurance (PMI), and
association fees. A pro-rated amount of these fees may have to be
paid at closing including
- Pre-paid interest - interest charges from the date of
closing to the end of the month
- Property taxes if due
- Hazard insurance, fire insurance or homeowners insurance has
to be paid for one year
- Mortgage insurance (PMI) may be required if the loan amount
is more than 80 percent of the value of the property. In the
past a whole year of PMI had to be paid up-front, however in
recent years many PMI companies only require on to two months
up-front. Mortgage insurance premiums are normally paid every
month with the loan payment
- Impound account may need money to be set up for future
payments
- Closing Statement – HUD1
- A detailed written summary of the financial settlement of a
real estate transaction, showing all charges and credits made, all
cash received and paid.
- Cloud on Title
- An outstanding claim or encumbrance that, if valid, would
affect or impair the owner's title. Compare with clear title.
- COFI
- A monthly cost-of-funds index (COFI) reflecting the average
interest rate paid by 11th Federal Home Loan Bank District savings
institutions for savings and checking accounts. The 11th district
covers Arizona, California and Nevada. The index is published on
the last day of the month and reflects the cost of funds for the
prior month. This rate is used by lenders to determine the index
rate for some of their variable rate loan products.
- Collateral
- An asset (such as a car or a home) that guarantees the
repayment of a loan. The borrower risks losing the asset if the
loan is not repaid according to the terms of the loan contract.
- Collection
- The efforts used to bring a delinquent mortgage current and to
file the necessary notices to proceed with foreclosure when
necessary.
- Co-Maker
- A person who signs a promissory note along with the borrower.
A co-maker's signature guarantees that the loan will be repaid,
because the borrower and the co-maker are equally responsible for
the repayment. See endorser.
- Commission
- The fee charged by a broker or agent for negotiating a real
estate or loan transaction. A commission is generally a percentage
of the price of the property or loan.
- Commitment
- A written document provided by a lender to agreeing to make a
loan on specific terms to a borrower or builder.
- Common Area Assessments
- Levies against individual unit owners in a condominium or
planned unit development (PUD) project for additional capital to
defray homeowners' association costs and expenses and to repair,
replace, maintain, improve, or operate the common areas of the
project.
- Common Areas
- Those portions of a building, land, and amenities owned (or
managed) by a planned unit development (PUD) or condominium
project's homeowners' association (or a cooperative project's
cooperative corporation) that are used by all of the unit owners,
who share in the common expenses of their operation and
maintenance. Common areas include swimming pools, tennis courts,
and other recreational facilities, as well as common corridors of
buildings, parking areas, means of ingress and egress, etc.
- Common Law
- An unwritten body of law based on general custom in England
and used to an extent in the United States.
- Community Home Improvement Mortgage Loan®
- An alternative financing option that allows low- and
moderate-income home buyers to obtain 95 percent financing for the
purchase and improvement of a home in need of modest repairs. The
repair work can account for as much as 30 percent of the appraised
value.
- Community Land Trust Mortgage Loan
- An alternative financing option that enables low- and
moderate-income home buyers to purchase housing that has been
improved by a nonprofit Community Land Trust and to lease the land
on which the property stands.
- Community Property
- In some western and southwestern states, a form of ownership
under which property acquired during a marriage is presumed to be
owned jointly unless acquired as separate property of either
spouse.
- Community Seconds®
- An alternative financing option for low- and moderate-income
households under which an investor purchases a first mortgage that
has a subsidized second mortgage behind it. The second mortgage
may be issued by a state, county, or local housing agency,
foundation, or nonprofit organization. Payment on the second
mortgage is often deferred and carries a very low interest rate
(or no interest rate at all). Part of the debt may be forgiven
incrementally for each year the buyer remains in the home.
- Comparables
- An abbreviation for "comparable properties"; used for
comparative purposes in the appraisal process. Comparables are
properties like the property under consideration; they have
reasonably the same size, location, and amenities and have
recently been sold. Comparables help the appraiser determine the
approximate fair market value of the subject property.
- Compound Interest
- Interest paid on the original principal balance and on the
accrued and unpaid interest.
- Comps, Comparables
- Comparable properties; properties in close proximity which
have sold recently and are about the same size with similar
amenities, used to determine the value of a property by
comparison.
- Condemnation
- The determination that a building is not fit for use or is
dangerous and must be destroyed; the taking of private property
for a public purpose through an exercise of the right of eminent
domain.
- Conditional Commitment
- A written document provided by a lender agreeing to make a
loan provided certain conditions are met prior to closing.
- Conditional Sales Contract (Land Contract)
- A real estate sales contract in which she seller (vendor)
agrees to convey title to the buyer (vendee) after certain
conditions have been met and transfer is not required within one
year.(installment selling arrangement whereby the buyer may use
and occupy land, but no deed is given by seller until the sales
price has been paid.
- Condominium
- A real estate project in which each unit owner has title to a
unit in a building, an undivided interest in the common areas of
the project, and sometimes the exclusive use of certain limited
common areas.
- Condominium Conversion
- Changing the ownership of an existing building (usually a
rental project) to the condominium form of ownership.
- Condominium Hotel
- A condominium project that has rental or registration desks,
short-term occupancy, food and telephone services, and daily
cleaning services and that is operated as a commercial hotel even
though the units are individually owned.
- Construction loan
- A short term loan to pay for the construction of buildings or
homes. These loans typically provide periodic disbursements to the
builder as each stage of the building is completed. When
construction is completed a take-out or permanent loan is used to
pay off the construction loan.
- Consumer Reporting Agency (or bureau)
- An organization that prepares reports that are used by lenders
to determine a potential borrower's credit history. The agency
obtains data for these reports from a credit repository as well as
from other sources. Experian, TransUnion and Equifax are the 3
main repositories.
- Consideration
- Anything of value given to induce another to enter into a
contract. Earnest money deposit on a sales contract is
consideration.
- Contingency
- The requirement that a particular event occur before a
contract is binding. For example: The sale of a home can be
contingent upon the buyer obtaining financing.
- Contract
- An agreement between competent parties to do or not do certain
things for consideration.
- To have a valid contract for the sale of real estate there
must be:
- an offer
- an acceptance
- competent parties
- consideration
- legal purpose
- written documentation
- description of the property
- signatures by principals or their
attorney-in-fact
- Contract of Sale
- See Agreement of Sale
- Conventional Loan
- Any mortgage loan other than a VA or an FHA loan. A convention
loan may be conforming or non-conforming.
- Convertibility Clause
- A clause in some ARMs which allows the buyer (borrower) to
change to a fixed-rate mortgage at a specified time.
- Condemnation
-
- Taking private property for a public use with compensation
to the owner under eminent domain. Used by governments to
acquire land for streets, schools, freeways, etc. and by
utilities to acquire necessary property.
- Declaring a structure unfit for use because of violations in
housing codes or other reasons.
- Conveyance
- The transfer of title of real property from one party to
another.
- Covenant
- A clause in a mortgage that obligates or restricts the
borrower and that, if violated, can result in foreclosure.
- Cooperative (Co-op)
- See Stock Cooperative.
- Convertible Adjustable Rate Mortgage (ARM)
- Some variable loans come with options to convert to a fixed
loan based on a pre-determined formula, during a given time
period. For example the 1 Year T-Bill ARM may be converted to a
fixed rate during the first five years on the adjustment date. One
could convert during the thirteenth, twenty-fifth, thirty-seventh,
forty-ninth or sixty-first month of the loan.
- Credit Life Insurance
- A type of insurance often bought by mortgagors because it will
pay off the mortgage debt if the mortgagor dies while the policy
is in force.
- Credit Report
- A report detailing a borrower's credit and payment history
including: revolving and installment accounts; public records such
as tax liens and judgments.
- Credit Repository
- An organization that gathers, records, updates, and stores
financial and public records information about the payment records
of individuals who are being considered for credit. Experian,
TransUnion and Equifax.
- Credit Score
- A credit score is a snapshot of a person’s credit risk at a
particular point in time. It is used by lenders to help determine
if a borrower qualifies for a loan. There are three main credit
reporting companies that issue these credit scores. Experian calls
it the FICO score, TransUnion calls it Empirica, and Equifax calls
it the Beacon.
- Creditor
- A person or entity (a bank or other lender) who funded the
loan and to whom a debt is owed.
- Cul-de-sac
- A dead-end street with a turn-around space at the end. These
are attractive to some homeowners because the ending street cuts
down on "thru" traffic, speeding, etc.
[Back to
the top of this page] D
- Debt Ratio
- This is a loan qualifying ratio used by lenders to determine
if a borrower qualifies for a loan. The debt (-to-income) ratio is
calculated by taking the borrower’s monthly debts, including house
payments, credit cards and personal loans, and dividing it by the
monthly income.
- Deed
- A written document by which title to real property is
transferred from one owner to another. The deed should contain an
accurate description of the property being conveyed, should be
signed and witnessed according to the laws of the State where the
property is located, and should be delivered to the buyer at
closing.
- Deed-in-lieu
- A deed given by a mortgagor (homeowner) to the mortgagee
(lender) to satisfy a debt and avoid foreclosure. Also called a
"voluntary conveyance." This avoids the foreclosure process,
however it may still be considered a negative mark on your credit
and affect your credit scores.
- Deed of Trust
- A security instrument (document describing the rights and
duties of the lender and borrower) used in real estate
transactions in many states. The parties to a deed of trust are:
trustee (third party), trustor (borrower), beneficiary (lender).
- Deed Restriction
- A clause in a deed that limits the use of land. Example : A
deed might require that a road cannot be built on the land.
- Default
- Failure to meet legal obligations in a contract, such as the
failure to make the monthly mortgage payment.
- Defective Title
- Any recorded instrument that would prevent a grantor/seller
from giving a clear title.
- Example: The seller has a contractor lien on the property that
was filed when he/she failed to pay the contractor for the kitchen
remodel. The seller may obtain clear title by paying the
contractor and removing the lien.
- Deferred Interest
- Unpaid interest added to the loan balance. This is common in a
negative amortized or option arm loan program. The minimum payment
is less than the interest charges. The interest that is not paid
is added to the balance.
- Deficiency Judgment
- Personal claim against the debtor when the sale of foreclosed
property does not yield sufficient proceeds to pay off the
mortgages, accrued interest, legal fees, etc.
- Delinquency
- Failure to make payments on time. A Notice of Default and
foreclosure process usually takes place after you are delinquent
for more than a few months.
- Depreciation
- When related to the appraisal of property, depreciation is the
decrease in value from any cause. When related to taxation, "book
depreciation" is a steady decrease (calculated using mathematical
formulas or schedules) in the owner's tax basis.
- Department of Veterans Affairs (VA)
- An independent governmental agency which guarantees long-term,
low- or no-money-down mortgages to eligible veterans.
- Discount Points
- Fees paid to a lender to reduce the interest rate.
- Documentary Tax Stamps
- Stamps affixed to a deed showing the amount of transfer tax.
- Dower
- The rights of a widow or child to part of a deceased husband's
or father's property.
- Downpayment
- The amount paid for the purchase of a property in addition to
the mortgage, but not including any closing costs.
- Example : John buys a house for $100,000 and obtains a loan
for $80,000. His downpayment is $20,000.
- Dragnet Clause
- A provision in a mortgage that pledges several properties as
collateral. A default in the mortgage could lead to foreclosure
proceedings on any of the properties in the dragnet.
- Due on Sale Clause
- A clause in the Deed of Trust or Mortgage that states that the
entire loan is due upon the sale of the property.
[Back to
the top of this page]
E
- Earnest Money
- A deposit made by a buyer of real estate towards the down
payment to evidence good faith. This money is typically held by
the real estate brokers or the escrow company.
- Easement
- The right to use the land of another for a specific purpose.
Easements may be temporary or permanent. Example: The utility
company may need an easement to run electric lines.
- Eminent Domain
- The right of the government or a public utility to acquire
property for necessary public use by condemnation, with proper
compensation to the owner.
- Encroachment
- A building, part of a building, or an obstruction (e.g., a
fence or wall) that physically intrudes upon or overlaps the
property of another.
- Encumbrance
- Any interest or right in real property possessed by a stranger
to the title, which affects the owner's property value, but does
not prevent the owner from transferring title. Encumbrances may
affect title, or condition or use of the property.
- Entitlement
- VA home loan benefits are known as entitlement and/or
eligibility.
- Equal Credit Opportunity Act (ECOA)
- A federal law that requires lenders and other creditors to
make credit equally available without discrimination based on
race, color, religion, national origin, age, sex, marital status,
or receipt of income from public assistance programs.
- Equity
- The market value of real property, less the amount of any
liens. Equity is often expressed as a percentage of the property
value.
- Equity Sharing
- Joint ownership of a property between the owner/occupant and
the owner/investor, that results in tax advantages for both
parties. Upon sale of the property the joint owners split profits
based on the percentage they own.
- Escheat
- The reversion of property to the state in the event that the
owner dies without leaving a will and has no legal heirs.
- Escrow
- 1. Delivery of a deed by a grantor to a third party for
delivery to the grantee upon the occurrence of a conditional
event.
- 2. Calif. Civil Code Sec.1057: "A grant may be deposited by
the grantor with a third person, to be delivered on the
performance of a condition, and, on delivery by the depositary, it
will take effect. While in the possession of the third person, and
subject to condition, it is called an escrow."
- Escrow Account
- The account in which a mortgage servicer holds the borrower’s
escrow payments prior to paying property expenses.
- Estate
- The ownership interest of an individual in real property. The
sum total of all the real property and personal property owned by
an individual at time of death.
- Eviction
- The lawful expulsion of an occupant from real property. The
legal process of eviction is different in each state.
- Examination of Title
- The report on the title of a property from the public records
or an abstract of the title.
- Exclusive Listing
- A written contract that gives a 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.
- Executor (Executrix?feminine for Executor)
- A person named in a will to carry out its provisions for the
disposition of the estate.
[Back to
the top of this page]
F
- Fair Credit Reporting Act
- A consumer protection law that regulates the disclosure of
consumer credit reports by consumer/credit reporting agencies and
establishes procedures for correcting mistakes on one's credit
record.
- Fair Market Value
- The highest price that a buyer, willing but not compelled to
buy, would pay, and the lowest a seller, willing but not compelled
to sell, would accept.
- Fannie Mae-Backed Security rates
- Fannie Mae pools large quantities of mortgages, creates
securities with them, and sells them as Fannie Mae-backed
securities. The rates on these securities influence mortgage rates
very strongly.
- Farmer's Home Administration (FmHA)
- An agency, within the U.S. Department of Agriculture, that
administers assistance programs for purchasers of homes and farms
in small towns and rural areas.
- Fed
- Federal Reserve Bank
- Federal Discount Rate
- The rate that the New York Fed charges for loans to member
banks.
- Federal Funds Rate
- The Rate banks charge each other for overnight loans.
- Federal Home Loan Bank Board (FHLBB)
- Provides financing to farmers.
- Federal Home Loan Mortgage Corporation (FHLMC, Freddie Mac)
- Freddie Mac maintains a nationwide secondary market primarily
for conventional loans originated by banks, thrift institutions
and other HUD-approved lenders. Freddie Mac finances most of its
operations through the sale of mortgage Participation
Certificates.
- Federal Housing Administration (FHA)
- An agency within the U.S. Department of Housing and Urban
Development (HUD). FHA offers mortgage insurance programs to
protect the lender in the event of default. Because lenders are
insured against loss, they can make affordable financing available
to borrowers who would not otherwise qualify.
- Federal National Mortgage Association (FNMA, Fannie Mae)
- Provides a secondary market for FHA, VA and conventional
loans. Fannie Mae issues mortgage-backed securities and guarantees
timely payment their principal and interest to investors.
- Federal Reserve System
- The central federal banking system that regulates and provides
services to member commercial banks. Also has the responsibility
for conducting federal monetary policy.
- Fee Simple (Fee Absolute or Fee Simple Absolute)
- Absolute ownership of real property; owner is entitled to the
entire property with unconditional power of disposition during the
owners life and upon his death the property descends to the
owner's designated heirs.
- Fico
- Fair Isaac Corporation. This credit score is reported on your
Experian (formerly TRW) credit report. A FICO score is a snapshot
of a person’s credit risk at a particular point in time.
- Fidelity Bond
- An assurance, generally purchased by an employer, to cover
employees who are entrusted with valuable property or funds.
- Example : A landlord employs a clerk who collects rents. To
safeguard these funds during the collection process, the landlord
purchases a fidelity bond the clerk.
- Fiduciary
- A person in a position of trust or responsibility with
specific duties to act in the best interest of a client. A real
estate broker is a fiduciary for his/her clients.
- Finance Charge
- Interest charged by a lender.
- Firm Commitment
- A lender’s agreement to make a loan to a specific borrower on
a specific property. This is usually given as a written loan
approval from a lender.
- First Mortgage
- A mortgage that has priority as a lien over all other
mortgages. In the case of a foreclosure the first mortgage will be
satisfied before other mortgages. See also second mortgage.
- Fixture
- Personal property attached to the land in such a way as to be
considered part of the real property.
- Flood Insurance
- An insurance policy that covers property damage due to natural
flooding. Flood insurance may be required on properties in a flood
zone.
- Foreclosure (Repossession)
- A legal process in which the right, title and interest of a
mortgagor or trustor in real property are terminated by selling
the property and applying the proceeds to satisfy liens of
creditors.
- Framed Page
- In HTML, refers to dividing the browser display area into
separate sections, each of which is really a different Web page.
- Free and clear
- A property that has no liens.
- Freddie Mac, Federal Home Loan Mortgage Corporation (FHLMC)
- A quasi-governmental agency that purchases conventional
mortgage loans from insured depository institutions (savings and
loans) and HUD-approved mortgage bankers.
- Forfeiture
- The loss of money, property, rights, or privileges due to a
breach of legal obligation.
- Front-end Ratio
- Monthly mortgage payments (PITI, principal, interest, taxes
and insurance) divided by your gross monthly income. This comes
out to a percentage, and a lender uses this percentage to get an
idea of how much of your income will be going towards paying your
loan. Most programs require a maximum ratio of 28-33%. A low ratio
is better.
- FSBO
- For sale by owner. A property for sale that is not listed with
a real estate broker.
- Fully indexed rate
- A fully indexed rate is the value of an index plus a margin.
See adjustable loans.
[Back to
the top of this page]
G
- General Warranty Deed
- A deed in which the grantor (seller) agrees to the protect the
grantee (buyer) against any other claim to title of the property.
See also warranty deed.
- Good Faith Estimate (GFE)
- The form that lists the settlement charges the borrower must
pay at closing. The lender is obligated to provide the borrower
this form within three business days of receiving the loan
application.
- Government National Mortgage Association (GNMA, Ginnie Mae)
- A government corporation which guarantees mortgage-backed
securities issued by approved lenders. GNMA mortgage-backed
securities are considered by many to be as safe as Treasury
securities.
- Grantee
- That party in the deed who is the buyer or recipient.
- Graduated Payment Mortgage (GPM)
- A trust deed or mortgage requiring increasingly higher
payments during the life of the loan. Negative amortization may
occur under some circumstances.
- Grandfather Clause
- The clause in a law permitting the continuation of a use,
business, etc., which was permissible but because of a change in
the law is now no longer permissible.
- Grantor
- That party who is the seller or the giver.
[Back to
the top of this page]
H
- Hazard Insurance (Fire Insurance, Homeowners insurance)
- A type of real estate insurance providing protection against
loss due to fire and other risks.
- Home Equity Conversion Mortgage (HECM)
- A special type of mortgage that enables older home owners to
convert the equity they have in their homes into cash, using a
variety of payment options to address their specific financial
needs. Unlike traditional home equity loans, a borrower does not
qualify on the basis of income but on the value of his or her
home. In addition, the loan does not have to be repaid until the
borrower no longer occupies the property. This is commonly known
as a reverse mortgage.
- Home Equity Line of Credit
- A mortgage loan, which is usually in a subordinate position,
that allows the borrower to obtain multiple advances of the loan
proceeds at his or her own discretion, up to an amount that
represents a specified percentage of the borrower's equity in a
property.
- Home Inspection
- A thorough inspection that evaluates the structural and
mechanical condition of a property. A satisfactory home inspection
is often included as a contingency by the purchaser. Contrast with
appraisal.
- Home KeeperSM
- Fannie Mae's adjustable-rate conventional reverse mortgage,
which allows older homeowners to borrow against the value of their
homes and receive the proceeds according to the payment option
they select. The amount available is based on the number of
borrowers and their ages and the adjusted property value. Anyone
62 years or older who either owns his or her own home free and
clear or has very low mortgage debt is eligible.
- Home Page
- The main page of a web site. This is usually the first page
that comes up on the computer screen. Typically, the home page
serves as an index or table of contents to other documents
available at the site. It is also referred to as the Index page.
- Home Warranty Plan
- Insurance that covers appliances, heating systems, etc.
Typically purchased at the time of closing.
- Homeowners Association
- An association of homeowners in a particular subdivision,
planned unit development (PUD), or condominium organized to manage
the common area of the development and to enforce the association
rules and regulations.
- Homestead
- Status provided to a homeowner's principal residence that
protects the home against certain types of judgments.
- Homestead Exemption
- A statutory exemption shielding real homestead property
against the rights of certain creditors. Regarding taxation: an
exemption reducing the assessed value of a principal residence for
the purposes of calculating property tax. E.g., John's principal
residence is assessed at $100,000 and the homestead exemption is
$7,000. His property taxes will be based on $93,000.
- Housing and Urban Development
- A U.S. government agency established to implement certain
federal housing and community development programs.
- Housing Code
- A local government ordinance that sets minimum standards of
safety and sanitation for existing residential buildings.
- HTML
- Short for Hyper Text Markup
Language, the authoring language used to create documents
on the World Wide Web
- HUD 1
- A closing document required by HUD that outlines the
settlement cost of a loan. The closing agent prepares this
document and sends it to the buyer upon closing.
- Hypothecate
- To pledge a property as security without having to give up
possession of it.
[Back to
the top of this page]
I
- Impound Account
- That portion of a borrower's monthly payments held by the
lender or servicer to pay for taxes, hazard insurance, mortgage
insurance, lease payments, and other items as they become due.
Also known as reserves.
- Improvements
- Additions to raw land such as buildings, streets, etc. that
add value to the land.
- Income (Capitalization) Approach
- An appraisal method used for the valuation of income-producing
property in which net income is capitalized.
- Income Property
- Real estate that generates rental income. Examples: apartment
buildings, office buildings and shopping centers.
- Index
- A statistic that indicates some current economic of financial
condition. Indexes are used to make adjustments in variable rate
loans.
- Inflation
- In economics, inflation is an increase in the general level of
prices of a given kind. General inflation is a fall in the market
value or purchasing power of money within an economy, and is
referred to as a rise in the general level of prices.
- Ingress and Egress
- The right to pass through a piece of property. See Easements.
- Installment Sale
- 1. Re. Taxation: When selling real property and receiving one
or more payments in subsequent years, the taxpayer may report the
sale as an installment sale. This allows the taxpayer to defer the
recognition of gain over many years and save taxes.
- 2. Installment sale land contract. See Conditional Sales
Contract.
- Interest Only
- An interest-only loan program is a loan program that has an
interest-only payment option. The loan can be a fixed rate or
variable rate program. The interest only monthly payment is the
amount of the interest rate times the original loan amount divided
by twelve. No principal is paid, and the loan balance does not
decrease. You may pay the interest only payment amount or pay the
fully amortized payment amount. The interest only payment option
is only available in the initial years of the loan term.
Conforming loan programs have the interest only term for ten to
fifteen years. Jumbo programs vary from three years up to ten
years.
- ISP
- Internet Service Provider, a company that
provides access to the Internet. For a monthly fee, the service
provider gives you a software package, username, password and
access phone number. You can then log on to the Internet and
browse the World Wide Web, and send and receive e-mail.
[Back to
the top of this page]
J
- Joint and Several Liability
- A creditor can demand full repayment from any and all of those
who have borrowed. Each borrower is liable for the full debt, not
just the prorated share.
- Joint Tenancy
- Ownership of a property by two or more people, each of whom
has an undivided interest with the right of survivorship.
- Example: John and Mary own a house in joint tenancy. Each owns
half of the entire (undivided) property. If John dies, Mary will
own the entire property and vice versa.
- Judgment
- The decision of a court of law stating that one individual is
indebted to another and fixing the amount of indebtedness.
Judgments, when recorded, become a lien on real property owned by
the defendant.
- Judgment Lien
- The claim on the property of a debtor resulting from a
judgment.
- Judicial Foreclosure
- A type of foreclosure proceeding used in some states that is
handled as a civil lawsuit and conducted entirely under the
auspices of a court.
- Jumbo Loan
- Loan size that is larger than the conforming loan limit
established by the Fannie Mae or Freddie Mac.
- Junior Mortgage
- A mortgage subordinate to another mortgage. In the case of a
foreclosure a senior mortgage will be paid prior to a junior
mortgage.
[Back to
the top of this page]
K
- Kicker
- A payment required by a mortgage in addition to normal
principal and interest. Sometimes known as a participation loan.
[Back to
the top of this page]
L
- Land Contract
- See Conditional Sales Contract
- Late Charge
- The penalty a borrower must pay when a payment is made a
stated number of days (usually 15) after the due date.
- Lease
- A written agreement between the property owner and a tenant
that stipulates the conditions under which the tenant may possess
the real estate for a specified period of time and rent.
- Leasehold Estate
- Tenant's right of possession for a specific period of time
under a lease agreement.
- Lease with Option to Purchase
- A lease under which the lessee has the right to purchase the
property. The option may run for a portion or for the full length
of the lease
- Legal Description
- Legally acceptable identification of real estate by one of the
following:
- the government rectangular survey
- metes and bounds
- recorded plat (lot and block number)
- Lessee
- A person to whom property is rented under a lease. (Tenant)
- Lessor
- A person who rents property to another under a lease.
(Landlord)
- Libor
- London Interbank Offered Rates. Average London Eurodollar
rates. The Libor Index rate is used in many variable loan
programs.
- Life Estate
- An estate in real property for the life of a living person.
The estate then reverts back to the grantor or to a third party.
- Lien
- A claim against the property for the payment of a debt,
judgment, mortgage or taxes.
- Example : Unpaid contractors may file a mechanic's lien.
- Line of Credit
- An agreement by a commercial bank or other financial
institution to extend credit up to a certain amount for a certain
time to a specified borrower. See home equity line of credit.
- Lis Pendens
- Latin for "lawsuit pending." Recorded notice that litigation
is pending on a property. Most lenders will require the clearance
of the Lis Pendens prior to closing.
- Listing
- Real Estate properties for sale are usually considered listed
when a real estate agent is contracted to sell the property, using
a listing agreement, and the property is posted in the multiple
listing service, MLS, for that local region. It can also be in an
Internet listing service online, which can be done directly by the
homeowner.
- Liquid Asset
- A cash asset or an asset that is easily converted into cash.
- Loan Application
- A document required by a lender prior to loan approval. The
application includes detailed information about the borrower and
the property.
- Loan Origination Fee or Points
- Charge by a lender or broker connected with originating a
loan. This is different from discount points which are used to buy
down the rate of interest.
- Loan Servicing
- The act of collecting loan payments, handling property tax and
insurance escrows, foreclosing on defaulted loans and remitting
payments to the investors.
- Loan to Value Ratio (LTV)
- The loan amount divided by the value of the property.
- Lock-in
- A written agreement in which the lender guarantees a specified
interest rate if a mortgage goes to closing within a set period of
time. The lock-in also usually specifies the number of points to
be paid at closing.
- Lock-in period
- The time period during which the lender has guaranteed an
interest rate to a borrower. See lock-in.
[Back to
the top of this page]
M
- Margin
- A fixed number added to the index to compute the rate on an
adjustable rate mortgage.
- Marketable Title
- Title that is free of liens, clouds and other legal defects
and hence is readily acceptable by a buyer.
- Market Value
- The highest price that a buyer would pay and the lowest price
a seller would accept on a property. Market value may be different
from the price a property could actually be sold for at a given
time.
- Master Association
- A homeowners' association in a large condominium or planned
unit development (PUD) project that is made up of representatives
from associations covering specific areas within the project. In
effect, it is a "second-level" association that handles matters
affecting the entire development, while the "first-level"
associations handle matters affecting their particular portions of
the project.
- Mechanics Lien
- The right of an unpaid contractor or subcontractor to file a
lien against property to recover the amount due to him/her.
- Merged Credit Report
- A credit report that contains information from three credit
repositories. When the report is created, the information is
compared for duplicate entries. Any duplicates are combined to
provide a summary of your credit.
- Modification
- The act of changing any of the terms of the mortgage.
- Mortgage
- A written instrument that creates a lien upon real estate as
security for the payment of a specified debt.
- Mortgage Backed Security (MBS)
- A bond or other financial obligation secured by a pool of
mortgage loans.
- Mortgage Banker
- Specializes in originating and servicing loans. They generally
sell their loans to investors, but may continue to service them.
- Mortgage Broker
- Arranges financing for a borrower by placing loans with
lenders. Mortgage brokers are paid a fee by the borrower or the
lender when a loan closes.
- Mortgage Life Insurance
- A type of term life insurance often bought by mortgagors. The
amount of coverage decreases as the principal balance declines. In
the event that the borrower dies while the policy is in force, the
debt is automatically satisfied by insurance proceeds.
- Mortgagee
- The lender.
- Mortgagor
- The borrower.
- Mortgage Insurance
- See private mortgage insurance (PMI)
- Mortgage Note
- A written agreement to repay a loan. The agreement is secured
by a mortgage, serves as proof of an indebtedness, and states the
manner in which it shall be paid. The note states the actual
amount of the debt that the mortgage secures and renders the
mortgagor personally responsible for repayment.
- Multidwelling Units
- Properties that provide separate housing units for more than
one family, although they secure only a single mortgage.
- Multifamily Mortgage
- A residential mortgage on a dwelling that is designed to house
more than four families, such as a high-rise apartment complex.
[Back to
the top of this page]
N
- Negative Amortization
- An increase in principal balance which occurs when the monthly
payments do not cover all of the interest cost. The interest cost
which is not covered by the payment is added to the unpaid
principal balance.
- Net Effective Income
- The borrowers gross income minus federal income tax.
- No-Doc Loan
- A loan requiring very little loan documentation. These loans
usually require large (25%) down payments.
- Nonconforming loan
- Loans that do not comply with Fannie Mae or Freddie Mac
guidelines.
- Notary Public
- One authorized to take acknowledgments of certain types of
documents, such as deeds, contracts, and mortgages.
- Note
- The Note is a promissory note, which is signed with loan
documents and states the loan amount, interest rate and loan
terms.
- Notice of default
- A letter sent to the defaulting party as a reminder of the
default.
[Back to
the top of this page]
O
- Offer
- An expression of willingness to purchase a property at a
specified price.
- Offeree
- One who receives the offer. When the buyer makes an offer to
the seller the seller is an offeree.
- Offeror
- One who makes the offer. When the buyer makes an offer to the
seller the buyer is an offeror.
- Office of Comptroller Currency
- The oldest federal financial regulatory body that oversees the
nation's federally chartered banks.
- Office of Thrift Supervision
- The OTS charters federal thrift institutions and is the
primary regulator of all federal and many state-chartered thrift
institutions.
- Open-end Mortgage
- A mortgage permitting the mortgagor to borrow additional money
under the same mortgage, with certain conditions.
- Open House
- A method of showing a home for sale to prospective buyers
where the home is left open for inspection by those who may be
interested in making a purchase.
- Option Arm
- The Option Arm loan program, commonly referred to as the
negative amortized loan, has a low starting payment rate.
Typically the starting rate is 1 to 2 percent. The initial monthly
loan payment is calculated based on the starting rate, but the
note rate will adjust to the Index plus the Margin after the first
one to three months. The payment remains the same for the entire
year, and is only adjusted yearly on the anniversary date. Since
the interest charges may exceed the monthly payment, the interest
that is not paid is added to the loan balance. This increases the
loan amount, rather than decreasing the loan balance as in a fully
amortized loan. Thus we have a negative amortization, or
increasing loan balance, during the initial years of this loan.
- Optionee
- One who receives or purchases an option.
- Optionor
- One who gives or sells an option.
- Oral Contract
- A verbal agreement. Verbal agreements for the sale or use of
real estate are normally unenforceable.
- Origination Fee
- See Loan Origination Fee.
- Owner Financing
- A property purchase transaction in which the property seller
provides all or part of the financing.
- Owner of Record
- The individual named on a deed that has been recorded at the
county recorders office.
- Owner Occupant
- A tenant of a residence who also owns the property.
[Back to
the top of this page]
P
- Package Mortgage
- Mortgage covering both real and personal property.
- Paper
- A mortgage, deed of trust or land contract provided in lieu of
cash.
- Partial Release
- A provision in a mortgage that allows some of the property
secured to be freed from serving as collateral.
- Participation Mortgage
- A mortgage that allows the lender to share in part of the
income or resale proceeds.
- Pass-through Certificates
- Interests in a pool of mortgages sold by mortgage bankers to
investors. Money collected as monthly mortgage payments is
distributed to those who own certificates.
- Permanent Loan or Mortgage
- A mortgage for a long period of time. Often referred to as the
mortgage that pays off a construction loan on a completed
property.
- Permit
- A document issued by a government regulatory authority that
allows the bearer to take some specific action. An occupancy
permit allows the owner of a building to occupy or rent the
building.
- Phishing
- Email phishing, also referred to as brand spoofing or carding,
is a variation on “fishing,” the idea being that bait is thrown
out with the hopes that while most will ignore the bait, some will
be tempted into biting. An example of receiving this kind of spam
email is “We have been trying to contact you regarding your loan
request. Your loan is approved. Click here to complete your loan
application.” Another example is a request for information using a
bank’s website header, so it looks like it’s coming from the bank,
but is actually a fake.
- PITI
- Principal, Interest, Taxes and
Insurance. Your mortgage loan payment usually includes the
principal and interest amounts. When you borrow more than 80
percent of the value of your home, lenders usually require that
you also pay the taxes and insurance payments with your loan
payment.
- Planned Unit Development (PUD)
- A zoning classification that allows flexibility in the design
of a subdivision. PUD's include individually owned units as well
as some common space that is jointly owned.
- Plat
- A plan or map of a specific land area.
- Plat Book
- A public record containing maps of land, showing the division
of the land into streets, blocks, and lots and indicating the
measurements of the individual parcels.
- Pledged Account Mortgage (PAM)
- When the borrower places money in a pledged savings account,
and these funds, plus interest earned, are gradually used to
reduce mortgage payments.
- Points
- Fees paid to lenders. 1 point = 1 percent of the loan amount.
On a $100,000 loan 1 point is $1000. Points may be further
classified into origination points or discount points.
- Portfolio Loan
- A loan that is held as an investment by a bank or savings and
loan, and NOT sold on the secondary market to investors.
- Power of Attorney
- A written document authorizing a person to act on the behalf
of another person. That person does not have to be an attorney.
See Attorney-In-Fact.
- Prepaid Interest
- Prepaid interest is the interest charged to borrowers at
closing to pay for the cost of borrowing for a balance of the
month. For example, if a loan closes on the 19th of the month and
the first payment is due on the 1st of the following month, the
lender will charge 12 days of prepaid interest.
- Prepayment
- Full or partial payment of the principal before the due date.
This might occur if the borrower makes extra payments, sells the
property, or refinances the existing loan.
- Prepayment Penalty
- Fees paid by the borrower if they pay the loan before its due
date.
- Pre-Qualification
- The process of determining how much money a prospective home
buyer will be eligible to borrow before he or she applies for a
loan.
- Primary Mortgage Market
- Companies that originate and service mortgage loans (banks,
savings & loans, credit union, mortgage bankers, institutional
lenders) make up the primary mortgage market. See also secondary
mortgage market.
- Prime Rate
- The rate offered to a bank's best customers.
- Principal
- The outstanding balance on a loan.
- Private Mortgage Insurance (PMI)
- In the event that you do not have a 20 percent down payment,
lenders will allow a smaller down payment - as low as 2 percent in
some cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage
insurance. Private mortgage insurance payments are normally made
annual or monthly. An impound account may be required.
- Probate
- Court process to establish the validity of the will of a
deceased person.
- Property Tax
- A government levy based on the market value (as assessed by
the county assessor's office) of the property.
- Public Sale
- An auction of property with notice to the general public.
- Purchase Agreement
- A real property agreement between a buyer and seller
specifying the price and terms of the sale.
- Purchase Money Mortgage
- A mortgage used to finance the purchase of a property.
[Back to
the top of this page]
Q
- Qualification Rate
- Rate of interest used to calculate whether or not a borrower
qualifies for a mortgage.
- Qualification Requirements
- Guidelines used by lenders to decide whether to loan money to
an applicant.
- Qualified Acceptance, Conditional Acceptance
- Acceptance for a loan (or other contract) provided that
certain conditions are met.
- Qualified Buyer
- A person who has been pre-approved for a mortgage loan.
- Qualifying Ratios
- Calculations that are used in determining whether a borrower
can qualify for a mortgage. They consist of two separate
calculations: a housing expense as a percent of income ratio and
total debt obligations as a percent of income ratio.
- Quiet Title (Action)
- A court action to settle a title dispute.
- Quit Claim Deed
- A deed which transfers whatever interest the maker of the deed
may have in the particular parcel of land. A quitclaim deed is
often given to clear the title when the grantor's interest in a
property is questionable. By accepting such a deed the buyer
assumes all the risks. Such a deed makes no warranties as to the
title, but simply transfers to the buyer whatever interest the
grantor has.
[Back to
the top of this page]
R
- Radon
- A radioactive gas which seeps up from the ground and can cause
health problems. A radon test is often part of the home
inspection.
- Real Property
- Land and appurtenances, including anything of a permanent
nature such as structures, trees, minerals, and the interest,
benefits, and inherent rights thereof.
- Realtor ®
- A real estate professional who is a member of the National
Association of Realtors.
- Real Estate Broker
- An individual who often owns a real estate company or is in a
management position, and who is licensed to represent a buyer or a
seller in a real estate transaction.
- Real Estate Settlement Procedure Act (RESPA)
- A law that states how mortgage lenders must treat those who
apply for real estate loans on property with one to four units.
- Example : A lender is required to provide a good faith
estimate of closing costs within three days of an application
being filed.
- Recapture tax
- Some government sponsored or insured programs, like HUD Low
Income Housing programs, require that the buyer occupy the
property and retain ownership for a specific period of time. If
the buyer sells the property and in some cases moves out of the
property, the tax benefits or subsidies received are recaptured,
meaning charged to the homeowner. This is a penalty assessed for
selling the house too early.
- Recession
- A recession is usually defined as a fall of a country’s real
Gross National Product in two or more successive quarters of a
year. A recession may also involve falling prices, which can lead
to a depression. In a free market economy, recessions come and go
at fairly regular intervals, often five to ten years, in what is
known as the business cycle.
- Reconveyance
- When a mortgage is paid in full, the lender conveys the
property back to the owner.
- Recording
- The act of entering into a book of public records instruments
affecting title to the real property. A lender requires that a
deed of trust or a mortgage be recorded to evidence the debt
against the property.
- Recording Fees
- Money paid to the lender for recording a home sale with local
authorities, making it public record.
- Recision
- The cancellation of a contract. When refinancing a mortgage on
a principal residence the law gives the homeowner three days to
cancel the contract.
- Recourse
- The right of the holder of a note secured by a mortgage or
deed of trust to claim money from the borrower in default in
addition to the property pledged as collateral.
- Redlining
- The practice of refusing to provide loans or insurance in a
certain neighborhood.
- Refinance
- Obtaining a new mortgage loan on a property already owned,
often to replace existing loans.
- Regulation Z (Reg Z)
- A federal regulation requiring creditors to provide full
disclosure of the terms of a loan including the terms of the loan
and the annual percentage rate (APR).
- Real Estate Investment Trusts (REIT)
- A trust that uses investors' money to purchase and manage real
estate. Investors realize some of the tax advantages in owning
real estate.
- Restrictive Covenants
- Private restrictions limiting the use of real property.
Restrictive covenants are created by deed and may "run with the
land," binding all subsequent purchasers of the land, or may be
"personal" and binding only between the original seller and buyer.
- Reverse Annuity Mortgage (RAM)
- A mortgage in which the lender makes periodic payments to the
borrower using the borrower's equity in the home as collateral.
- Reverse Mortgage
- A mortgage used by the elderly that provides income as long as
they live in exchange. Payments made cause the loan principal to
increase.
- Right of First Refusal
- A portion of an agreement that requires a property owner to
give one party the opportunity to buy or lease the property before
the property is made available to other potential buyers.
- Right of Ingress or Egress
- The right to enter or leave designated premises.
- Right of survivorship
- The right of a surviving joint tenant to acquire the interest
of a deceased joint owner.
- Rollover Loan
- A loan that is amortized over a long period of time (e.g., 30
yrs) but the interest rate is fixed for a short period (e.g., 5
yrs). The loan may be extended or rolled over, at the end of the
shorter term, based on the terms of the loan.
[Back to
the top of this page]
S
- Sales Agreement or Sales Contract
- See Agreement of Sale.
- Savings & Loan
- Depository institutions that specialize in originating,
servicing and holding mortgage loans primarily on owner occupied
residential property.
- Second Home
- Also known as a vacation home. This home is different from an
investment property as it is not rented, but used occasionally by
the owners.
- Second Mortgage
- A subordinated lien, created by a mortgage loan, over the
amount of a first mortgage. Second mortgages generally carry a
higher rate than a first mortgage since they represent a higher
risk for an investor.
- Secondary Mortgage Market
- The market where banks, savings & loans and mortgage
bankers can sell mortgages to investors like Fannie Mae or Freddie
Mac.
- Section 1031
- The section of the IRS that deals with tax free exchanges of
certain property. General rules for tax free exchanges are
- The properties must be :
- Exchanged
- Similar
- Used for business or as an investment
- Section 8 Housing
- Privately owned rental units participating in the low-income
rental assistance program. Landlords receive subsidies on behalf
of qualified low-income tenants, allowing the tenants to pay a
limited proportion of their incomes toward the rent.
- Security
- Property that serves as collateral for a debt.
- Servicer
- An organization that collects principal and interest payments
from borrowers and manages borrowers’ escrow accounts. The
servicer often services mortgages that have been purchased by an
investor in the secondary mortgage market.
- Servicing
- The act of billing, collecting payment, filing reports,
managing impound accounts and handling defaults on a mortgage.
- Settlement Cost (HUD guide)
- See Buying Your Home: Settlement Costs and Information (HUD
guide)
- Settlement Statement
- See HUD 1
- Shared Appreciation Mortgage
- A residential loan with a fixed, below-market interest rate in
which the lender is entitled to a specified share of property
appreciation during an agreed upon time period.
- Sheriff's Deed
- A deed given at the sheriff's sale in the foreclosure of a
mortgage.
- Simple Interest
- Interest which is computed only on the principal balance.
- Single Family Home (SFR)
- A type of residential structure designed to include one
dwelling. E.g., town home, detached unit.
- Example : Town houses, detached units.
- Soft Market
- A market where houses aren't selling much or quickly, so the
sales price is likely to be significantly lower than the asking
(listing) price. It's a good time for buyers to buy, but not the
best time for prospective sellers to sell.
- Spec House
- A single family dwelling constructed by a builder in
anticipation of finding a buyer.
- Special Assessment
- A special tax imposed on property, individual lots or all
property in the neighborhood to pay for improvements - street
lights, sidewalks, etc.
- Special Warranty Deed
- The grantor does not warrant against title defects arising
from conditions that existed before he/she owned the property. The
seller warrants that he/she has done nothing to impair title.
- Specific Performance
- A legal action in which the court requires a party to a
contract to perform their obligations under the terms of the
agreement.
- Stock Cooperative
- A common interest development in which a corporation holds
title. Stock and exclusive right to occupancy are given to
individual members (stock holders) of the stock cooperative.
- Standard Uniform Loan Application (Form 1003)
- A standard loan application widely used in the mortgage
industry.
- Subdivision
- A tract of land divided into lots suitable for home building
purposes.
- Subject To Clause
- A clause stating that the grantee takes title "subject to" an
existing mortgage or trust deed. The original mortgagor remains
responsible for any deficiency in the event of foreclosure. See
Assumable Mortgage.
- Subordinate Financing
- Any mortgage or other lien that has a priority that is lower
than that of the first mortgage.
- Subordination
- A loan in a lower priority, for example a second mortgage is
subordinate to a first.
- Subsidized Second Mortgage
- An alternative financing option known as the Community
Seconds® mortgage for low- and moderate-income households. An
investor purchases a first mortgage that has a subsidized second
mortgage behind it. The second mortgage may be issued by a state,
county, or local housing agency, foundation, or nonprofit
corporation. Payment on the second mortgage is often deferred and
carries a very low interest rate (or no interest rate). Part of
the debt may be forgiven incrementally for each year the buyer
remains in the home.
- Survey
- Map made by a licensed surveyor who measures land and charts
its boundaries, improvements and relationship to the property
surrounding it.
- Sweat Equity
- Value added to a property due to improvements made personally
by the owner.
[Back to
the top of this page] T
- Takeout Financing
- A commitment to provide permanent financing upon completion of
construction. The take out loan normally pays off the construction
loan.
- Tax Lien
- Lien for nonpayment of taxes.
- Tax Sale
- Public sale of a property at an auction by a government
authority as a result of non-payment of taxes.
- Teaser Rate
- A low initial interest rate on a mortgage.
- Tenancy at Sufferance
- Tenancy established when a person who had been a lawful tenant
wrongfully remains in possession of property after expiration of a
lease.
- Tenancy at Will
- A license to use or occupy land and buildings at the will of
the owner. The tenant may decide to leave the property at any time
or must leave at the landlords will.
- Tenancy by the Entirety
- A form of ownership by husband and wife whereby each owns the
entire property. In event of the death of one, the survivor owns
the property without probate.
- Tenancy for Years
- Created by a lease for a fixed term, such as 6 months, 2
years, etc.
- Tenancy in Common
- Ownership of a property by 2 or more persons, each of whom has
an undivided interest, without the right of survivorship. Upon the
death of one of the owners, the ownership share of the deceased is
inherited by the beneficiary designated on the owner's will.
- Tenancy in Severalty
- Ownership of property by one person.
- Time Share
- A form of property ownership under which a property is held by
a number of people, each with the right of possession for a
specified time interval. Time sharing is used mostly for vacation
properties.
- Time is of the Essence
- Legal phrase in a contract requiring all references to
specific dates and times noted in the contract be interpreted
exactly.
- Title
- Evidence that the owner of the property is in lawful
possession. Evidence of ownership.
- Title Insurance
- An insurance policy which protects the insured against loss
arising from defects in title. Title insurance policies are
typically obtained for the buyer and the lender.
- Title Report
- A document indicating the current state of title. The report
includes information on the current ownership, outstanding deeds
of trust or mortgages, liens, easements, covenants, restrictions,
and any defects.
- Title Search
- An examination of the public records to determine the
ownership and encumbrances affecting the property.
- Total Expense Ratio
- Total obligations as a percentage of gross monthly income. The
total expense ratio includes monthly housing expenses plus other
monthly debts.
- Town House
- Residence which normally has 2 or more floors and is attached
to other similar units. Town houses are commonly found in planned
unit developments (PUDs) and condominiums.
- Tract
- A parcel of land, generally held for subdividing.
- Trade Equity
- Equity that results from a property purchaser giving his or
her existing property (or an asset other than real estate) as
trade as all or part of the down payment for the property that is
being purchased.
- Transfer Tax
- Tax paid to the city, county, state or other government entity
upon sale of a property.
- Transfer of Ownership
- Any means by which the ownership of a property changes hands.
Lenders consider all of the following situations to be a transfer
of ownership: the purchase of a property "subject to" the
mortgage, the assumption of the mortgage debt by the property
purchaser, and any exchange of possession of the property under a
land sales contract or any other land trust device. In cases in
which an inter vivos revocable trust is the borrower, lenders also
consider any transfer of a beneficial interest in the trust to be
a transfer of ownership.
- Treasury Bill
- Treasury bills are short-term debt instruments used by the
U.S. Government to finance their debt. Commonly called T-bills
they come in denominations of three months, six months and one
year. Each Treasury bill has a corresponding interest rate (i.e.
3-month T-bill rate, 1-year T-bill rate). The rate determines the
T-bill Index rate, which is used in many variable rate loan
programs.
- Triple-Net Lease
- One in which the tenant pays all operating expense of the
property. The landlord receives the net rent.
- Trust Account
- A separate bank account maintained by a broker or escrow
company to handle all money collected for clients. A broker may
not commingle these funds with his/her own funds.
- Trust Deed
- See Deed of Trust.
- Trustee
- A party who is given legal responsibility to hold property in
the best interest of or "for the benefit of" another. The trustee
is one placed in a position of responsibility for another, a
responsibility enforceable in a court of law.
- Truth in Lending
- See Regulation Z.
- Two-Step Mortgage
- A mortgage in which the borrower receives a fixed rate for a
specified number of years (most often 5 or 7), and then receives a
new interest rate based on the terms in the note.
- Two- to Four-Family Property
- A property that consists of a structure that provides living
space (dwelling units) for two to four families, although
ownership of the structure is evidenced by a single deed.
[Back to
the top of this page] U
- Underwriting
- The decision whether to make a loan to a potential home buyer
based on credit, income, employment history, assets, etc.
- Undivided Interest
- An ownership right to use and possess a property that is
shared among co-owners, with no one co-owner having exclusive
rights to any portion of the property.
- Unimproved Property
- Land that has received no development.
- Unencumbered Property
- Real estate with free and clear title.
- Unrecorded Deed
- A document that transfers title from the grantor to the
grantee without recording (i.e. providing public notice).
- Usury
- Charging a rate of interest greater than that permitted by
law.
[Back to
the top of this page] V
- Vacation Home
- See second home.
- VA Loan
- Home loan guaranteed by the U.S. Veterans Administration,
enabling a veteran to buy a home with no money down.
- Variable Rate Mortgage
- See Adjustable Rate Mortgage
- Verification of Deposit (VOD)
- A document signed by the borrower's bank or other financial
institution verifying the account balance and history.
- Verification of Employment
- A document signed by the borrower's employer verifying his/her
starting date, job title, salary and probability of continued
employment.
[Back to
the top of this page] W
- Waiver
- The voluntary renunciation, abandonment, or surrender of some
claim, right, or privilege.
- Walk-Through Inspection
- A final walk-through immediately prior to closing to verify
that no changes have taken place and no new damage has occurred.
- Warehousing
- Mortgage bankers and other financial institutions make loans
that are then periodically sold on the secondary market. After the
loan is made but before it is sold, the loan is said to be in the
lender's warehouse.
- Warranty Deed
- A deed conveying the title to a property with a warranty of a
clear marketable title.
- Wear and Tear
- Normal use and the resulting reduction in value of a property.
- Web Portal
- Commonly referred to as simply a portal, a Web site or service
that offers a broad array of resources and services, such as
e-mail, forums, search engines, and on-line shopping malls. The
first Web portals were online services, such as AOL, that provided
access to the Web, but by now most of the traditional search
engines have transformed themselves into Web portals to attract
and keep a larger audience.
- Wraparound Mortgage
- A loan arrangement whereby the existing loan is retained and a
new loan is added to the property.
Example : The seller sells
his/her property for $200,000. The buyer puts $80,000 down. The
seller has an existing loan balance of $100,000 for a remaining
period of twenty-five years at an interest rate of 6 percent. The
seller then makes a wraparound mortgage to the buyer, (where the
seller acts as a lender) for $120,000 at 8 percent. The seller has
to continue making payments on his old loan. They buyer has to pay
the seller on the new loan. The buyer may at a later date
refinance the property and close both loans.
- WYSIWYG
- What You See Is What
You Get. Computer software may display data on the
computer screen with a format and color scheme that is different
when you print the page or when you view it in a Web browser.
Software that is WYSIWYG will print and look the same as what you
see on the screen in the WYSIWYG.
[Back to
the top of this page] Z
- Zero Lot Line
- A form of housing where individual units are on separate lots,
but are attached to one another. Example: PUD, townhouse.
- Zoning
- Areas may be zoned to specify use of a property i.e.
residential, commercial, agricultural. These zoning ordinances are
normally enforced by the city or the county.
[Back to
the top of this page]
|